Analyst Says New Beef Plant In Oklahoma Panhandle Could Harm Industry

Saturday, October 21st 2006, 3:18 pm

By: News On 6

OKLAHOMA CITY (AP) _ A $200 million beef processing plant that is to be built in the Oklahoma Panhandle could be financially harmful to the beef industry, an industry analyst said.

Smithfield Beef Group and ContiGroup Cos. Inc. announced Wednesday they had formed a partnership to build a 650,000-square-foot beef processing plant near the Texas County town of Hooker and process 5,000 head of cattle per day.

A story published on the online meat industry Web site, www.meatnews.com, JP Morgan Chase analyst Pablo E. Zaunic said a processing plant that size would add too much capacity to the industry and the beef processing industry's financial performance could suffer.

The plant would add about 3.6 percent to the industry's current capacity and that's ``particularly bad news for those (processing plants) in the Texas, Colorado, Kansas areas because of their proximity to the planned Oklahoma plant,'' Zaunic was quoted as saying in the article published under the headline ``New Plant Could Be Bad for Industry.''

He also questioned whether the announcement was part of a Smithfield Beef Group strategy to force a competitor, HM Capital Partners, to sell the Swift beef processing plants it already operates.

Smithfield spokesman Lyle Orwig said the company would not comment on the article.

``That's clearly an opinion piece and they're certainly entitled to their opinion,'' Orwig said.

Chris Hitch, vice president for feedlot operations for Guymon-based Hitch Enterprises said the new plant would add production efficiencies that should offset potential price drops forecast by the Chase analyst.

``Once again, if Smithfield builds the plant, the efficiencies gained from a new plant should make the $25-per-head profit area more likely to attain.''

When the plant opens in mid 2008 it will employ up to 3,000 people.