UPDATE 2-Cargill to shut Texas beef plant as cattle herd shrinks

Thu Jan 17, 2013 4:09pm EST
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* US cattle herd smallest in 60 years

* Drought, high feed costs forced herd liquidation

* Cargill's action lifts shares of rival Tyson-analyst

By Theopolis Waters and Christine Stebbins

CHICAGO, Jan 17 (Reuters) - U.S. agribusiness giant Cargill Inc, and one of the nation's largest beef processors, said on Thursday it will close its Plainview, Texas, beef plant on Feb. 1 in reaction to the smallest U.S. cattle supply in more than 60 years.

"The U.S. cattle herd is at its lowest level since 1952. Increased feed costs resulting from the prolonged drought, combined with herd liquidations by cattle ranchers, are severely and adversely contributing to the challenging business conditions we face as an industry," John Keating, president of Cargill Beef, said in a statement.

The company also cited an over capacity in beef processing in the Texas Panhandle, where Cargill operates two of the four beef processing plants there.

Shares of rival beef producer Tyson Foods Inc rose on Thursday as one less beef plant should benefit the industry.

"Industry capacity utilization rates in beef packing have been deteriorating in recent years thanks to fewer available cattle. With a big plant out of commission, capacity utilization rates should rise and packers should gain some leverage," JP Morgan analyst Ken Goldman said in an email.   Continued...