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Tyson to suspend Denison plant operations

Monday, January 10, 2005

The pork processing operation at Tyson Fresh Meats Inc. Storm Lake plant will not be affected by suspension of some of the company's beef operations which include the plant at Denison, according to a company spokesman.

"This only affects the beef side of the operation," said Gary Mickelson, Storm Lake area native and Tyson corporate communications director at the company's corporate headquarters in Springdale, Ark. "It's unfortunate that it's forced into taking this step."

While there are no large numbers of beef producers in Buena Vista County, Mickelson said neighboring Crawford and Carroll counties to the south could feel a greater impact from the Carroll plant closing.

In a Jan. 6 press release, Tyson said that unfavorable beef operating margins had prompted the company effective next Monday to temporarily suspend operations at four beef plants and the second shift at another. In addition to Denison, the affected plants located in the Upper Midwest and Pacific Northwest have been hurt by a combination of tight cattle supplies, lackluster domestic beef demand, and the continued absence of key export markets.

Beginning January 10, Tyson will suspend operations at plants in Denison; Norfolk and West Point, Neb.; and Boise, Idaho. The company will also temporarily discontinue second shift processing at Pasco, Wash. The suspension of operations is expected to last three to five weeks and will reduce the company's weekly cattle slaughter by 25,000 to 30,000 head, compared to pre-holiday levels.

"This is a difficult decision, however, we believe it's the right thing for us to do at this time, especially given the challenging market conditions and unfavorable operating margins our beef business continues to face," said John Tyson, chairman and CEO of Tyson Foods. "Our plants have been running at less than 75 percent of capacity over the past two months, which is 10 to 15 percent below historical levels."

"The cash market right now is right up there," said Curt Rininger, market analyst for Farmers Options and Hedging Service in Newell. Rininger said one impact from the plant closings could be a lowering of beef prices with overfat cattle that would draw lower prices at slaughter.

"Is this going to cause the animals out there to be overdone?" Rininger asked. "Are they (wholesalers) going to keep their price right up there?"

Rininger said the plant closings came as something of a surprise to him, particularly in the widespread area of the closings.

"I was surprised by as many as they're closing," Rininger said. "This covers a pretty broad area and it affects a lot of producers."

Despite the record levels that higher-end beef products have reached recently, Rininger said that will not likely change loyal beef consumers. "If a person wants a steak, he's going to buy a steak," Rininger said.

Rininger said the recent beef price increases may not be to the industry's advantage in the long run.

"It is a very significant thing," Rininger said of the price increases. "It could backfire. You don't mess with the consumer too long. Let's face it. The consumer has the last word."

Nationwide, U.S. cattle marketings were down more than 8 percent in 2004. "We anticipate cattle numbers will increase in the coming months," according to Gene Leman, senior group vice president of Tyson Fresh Meats. "We also look forward to the previously announced reopening of the U.S. border to Canadian cattle in early March, which will especially benefit our plants in the Upper Midwest and Pacific Northwest."

Based upon the company's outlook for fiscal year 2005, the company now estimates its fiscal 2005 diluted earnings per share to be in the range of $1.15 to $1.40. The company still expects the majority of its earnings to occur in the last six months of the fiscal year.

Approximately 2,100 workers are affected by the temporary suspension of operations. This includes 275 Team Members at Denison, 900 at Norfolk, 275 at West Point, 250 at Boise and 400 at Pasco.

Tyson is encouraging affected team members to take paid vacation for the first week operations are suspended. The company will then pay the equivalent of a 32-hour work week in each of the next three weeks workers are off the job. Tyson will also continue to offer benefits, including health insurance, to qualified team members.

Most management, management support and maintenance workers at the affected plants will remain on the job, working on various maintenance, sanitation and training projects.

Tyson Foods, Inc., founded in 1935 with headquarters in Springdale, Ark., is the world's largest processor and marketer of chicken, beef, and pork and the second-largest food company in the Fortune 500. The company produces a wide variety of protein-based and prepared food products, which are marketed under the "Powered by Tyson" strategy. Tyson is the recognized market leader in the retail and foodservice markets it serves, providing products and service to customers throughout the U.S and more than 80 countries. Tyson has approximately 114,000 team members employed at more than 300 facilities and offices in the United States and around the world.

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