Amarillo-based Friona and Cargill have a “longstanding partnership” with the former supplying cattle to the latter’s beef processing plants. The two sites that Friona intends to acquire from Cargill will continue to produce cattle for the meat processor.
John Keating, president of Cargill’s beef business in Wichita, said the sale would enable the company to “redeploy tens of millions of dollars annually into investments that will help us grow our protein business”. Capital freed up by the deal would otherwise have been ring-fenced as funds used to buy and feed cattle.
The deal is still pending regulatory review and terms have not been disclosed. There are approximately 90 people who work at Cargill’s Bovina and Dalhart feedyards, all will be offered positions with Friona Industries.
String of investments
Keating said the sales “makes sense” to both businesses. For Cargill, it means more money to pump into protein investments, while Frionagets an enhanced feedyard portfolio with more capacity to supply cattle to Cargill. Cargill, according to Keating, assessed the “future direction protein demand is headed” and concluded that redeploying capital spent in feedyards would “enhance” other business capabilities.
In the past year, the meat processor has confirmed close to $500m in acquisitions and liquid investments, with a focus on growing its North American meat portfolio. Investments include: the acquisition of FPL’s beef processing site in South Carolina; the renovation of a mince plant to a cooked meat factory in Nebraska; and a $50m state-of-the-art distribution centre in Dodge City, Kansas.
“These are concrete examples of our ongoing commitment to grow our protein business,” said Keating. “We have a lot of positive momentum and are confident it will continue to build going forward as we continue to help our customers’ businesses thrive.”
The investment comes as the meat processor struggles with profit margins in the face of extreme volatility in the US beef market. Third-quarter revenue for the agri-food trader dropped by 11% to $25.2bn, according to trading figures published in April.