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Meat Companies Shed More Jobs

by 5m Editor
19 February 2009, at 6:50am

US - Butterball, Smithfield Foods, Tyson Foods, Pilgrim's Pride and Petit Jean Poultry have all announced job losses in recent weeks as the US poultry industry struggles for survival in a very difficult market.

Butterball LLC is cutting the third shift, about 150 positions, from its processing plant in Huntsville, the company stated to Arkansas Democratic Gazette. The move came the same day Butterball stakeholder Smithfield Foods Inc. said it plans to cut 1,800 jobs and close six plants.

The Butterball cuts are expected to take place on 9 March, the company stated.

In the release, Butterball LLC Chief Executive Officer, Keith Shoemaker, attributed the company's problems to government ethanol subsidies driving up the cost of feed grains and record fuel prices.

Smithfield Foods acquired an interest in three Arkansas turkey plants in late 2006 as part of a $575 million cash and stock acquisition of most of ConAgra Food Inc.'s branded meats business. The plants operate under Butterball LLC, with a 51 per cent ownership by Maxwell Farms Inc. of Goldsboro, North Carolina, and a 49 per cent stake by Smithfield Foods.

The plants in Jonesboro, Huntsville and Ozark employ 1,307. The Huntsville plant, which has 769 workers, is the company's largest employer in the state.

Arkansas ranks third in turkey production with 31 million birds raised in 2007, according to data from the US Department of Agriculture.

Kipp Bodnar, a spokesman for Butterball LLC, said that the lay-offs were not part of the restructuring of Smithfield Foods.

Chief Executive, C. Larry Pope, said Smithfield Foods, the nation's largest pork producer, was switching its focus from buying up its hard-pressed competitors to operating more efficiently.

Smithfield will combine seven of its independent operating companies into three main units: The Smithfield Packing Co., John Morrell & Co. and Farmland Foods Inc. Further, John Morrell and Farmland will combine their sales forces.

Plants slated for closure are Smithfield Packing Co. plants in Smithfield, Virginia; Plant City, Florida; and Elon, North Carolina; as well as a John Morrell plant in Great Bend, Kansas; a Farmland Foods plant in New Riegel, Ohio; and an Armour-Eckrich Meats factory in Hastings, Nebraska.

The moves will lead to annual savings, after expenses, of about $55 million in fiscal 2010 and $125 million by the following year.

Joe Beaulieu, an analyst for Chicago-based Morningstar, said the Smithfield restructuring will benefit the market and industry rivals like Springdale-based Tyson Foods Inc. by cutting overall production.

"Oversupply has been a problem in the pork industry," he said.

Tyson Foods, the world's largest meat producer, which makes chicken, beef and pork, has seen its chicken unit sag. Richard Bond abruptly resigned as chief executive last month and was replaced on an interim basis by former CEO, Leland Tollett.

The meat industry is slumping as companies like Smithfield recover from volatile energy and commodity costs that reached record highs over the summer, continues Arkansas Democratic Gazette. An oversupply of meat on the market has been keeping prices down, while tight credit markets have hurt the potential for exports, a key market for meat producers. Further, a drop in restaurant spending by consumers has lowered demand.

The Huntsville Butterball plant has often cut or expanded the third shift, or the overnight staff, as the economy and the demands of the turkey market dictated, said Richard Gillham, president of the Huntsville Area Chamber of Commerce.

Mr Gillham said the third shift is staffed by people who drive in from the outlying areas of Madison County, so it is hard to tell what effect the loss of the shift will do to Huntsville's economy.

"We're very concerned about the loss of any jobs in Madison County or the Huntsville area, for that matter," he said. "We are open to explore any possible solution for these people."

Huntsville, the county seat of Madison County, had a labour force of 7,975 and an unemployment rate of 4.8 per cent as of December. The state's unemployment rate was 6 percent for December, compared with 7.2 per cent nationally.

Kathy Deck, economist and director of the University of Arkansas at Fayetteville's Center for Business and Economic Research, said the loss of so many jobs in a small community like Huntsville is bad news.

"Unfortunately, we are going to have a steady diet of these type announcements as companies everywhere are forced to make the really tough decision to cut their work forces," Ms Deck said.

Bentonville-based Wal-Mart Stores Inc. said last week that it would lay off 700 to 800 workers at its headquarters, reducing its staff there by up to 5.7 per cent.

Statewide, the poultry and food production industries have cut jobs and closed plants.

Texas-based Pilgrim's Pride, the nation's largest poultry producer, cut 700 jobs in El Dorado and 360 in Clinton and cancelled contracts with some chicken farmers. The poultry giant later filed for bankruptcy protection.

Danville-based Petit Jean Poultry Inc. eliminated 800 jobs when it closed its Danville plant in January. Cargill Inc. said in April that it would not rebuild a Cargill Meat Solutions plant in Booneville that was gutted by fire, leaving 800 without jobs, concludes the Arkansas Democratic Gazette article.