Colorado cattle producers were relieved last week when a Brazilian concern agreed to buy Swift & Co. and its Greeley beef-packing plant.
The announcement ended months of speculation about the future of the Greeley plant, which has been running at reduced capacity for more than two years.
Under a worst-case scenario, the biggest beef-processing plant in the state might have been shuttered – though company officials say that was never a possibility.
“Some of the rumors were that the plant would be bought, sold off or shut down. That would not have been a good thing for us,” said Rex Beall, president of family-owned Ulrich Farms in Platte ville. “We rely heavily on Swift because they kill 100 percent of the cattle in this area.”
“We know now who we are going to be dealing with,” said Steve Gabel, owner of Magnum Feedyard in Wiggins.
Speculation about the plant began after Swift officials announced in January they were considering a potential sale of the company, among other options.
Swift and other beef producers have suffered in recent years from reduced demand, particularly in Asia, and from low prices. Greeley-based Swift, owned by private-equity firm HM Capital and Booth Creek Management of Vail, has lost money in every quarter but one since late 2004, after mad cow disease was found in some American cattle.
Demand and prices are recovering.
The Greeley plant, which employs 1,900, is one of four beef facilities operated by Swift, the country’s No. 3 beef producer. Swift laid off 800 workers in December 2004 and 300 more in February as it eliminated one of its two meatpacking shifts.
Operating one shift cut the number of cattle slaughtered each day to about 3,000, down from 5,500. Steve Kay, publisher of Cattle Buyers Weekly, said that reduced the plant’s efficiency.
“The perception in the industry is that the Greeley plant is large and ungainly. That it’s not well-designed,” he said. “Lower efficiency means lower profits.”
Swift spokesman Sean McHugh said the company is happy with the plant.
“The Greeley facility is a great beef facility. We’ve invested a tremendous amount of capital in the facility over the years,” McHugh said.
The plant is equipped to handle “value-added” beef production, including slicing, grinding, spicing and marinating, all of which increase profits, he said.
Officials for JBS SA, which is buying Swift for $1.4 billion, have said they hope to return the Greeley plant to two shifts.
Swift officials, too, have considered doing that, McHugh said. Their plans were delayed by immigration raids at four Swift plants in December that resulted in more than 1,200 arrests.
A federal grand jury is investigating an identity-theft ring that supplied illegal-immigrant workers at the company with IDs. Swift and its officials have not been charged or implicated.
Another problem with all of Swift’s plants, Kay said, is that the company has invested less than its competitors in capital improvements. He said Swift spent an average of 0.6 percent of sales on capital expenditures during the last three years, compared with 2 percent for industry leader Tyson Foods and 3 percent for Smithfield Foods.
One potential bidder for Swift told Kay it would have to invest $100 million to $150 million in Swift’s plants, something he doesn’t expect JBS to do.
McHugh did not dispute Kay’s calculation of Swift’s capital expenditures, but he said the company is comfortable with its level of investment in the plants.
Colorado cattle raisers and feeders say they’re pleased that the JBS deal keeps four distinct beef producers in the U.S. – competition that should bolster cattle prices.
“From our vantage point, it’s very positive news. It brings additional equity to our industry, allows Swift to stay intact and brings more competition to the marketplace,” said Gabel of Magnum Feedyard.
Not all cattlemen are happy, however. The Ranchers-Cattlemen Action Legal Fund, a Montana group with 15,000 members in the cattle-raising industry, said the deal opens U.S. beef producers to unfair competition from Brazil.
“What all this means for U.S. cattle producers is that the sleeping giant is awakening and quickly moving in our direction,” said Eric Nelson, chairman of the group’s trade committee. “Brazil could drive our domestic prices into the basement, resulting in a mass exodus of U.S. cattle producers.”
But the Centennial-based National Cattlemen’s Beef Association, the largest industry group, said the deal “will have absolutely no impact regarding access for Brazilian beef and cattle. … It’s a global marketplace, and many of the companies investing heavily in rural America right now are foreign-owned. This type of investment is critical to our economy and should not be feared or discouraged.”
Staff writer Greg Griffin can be reached at 303-954-1241 or ggriffin@denverpost.com.
