Wednesday’s announcement of the perspective sale pertains to feed yards in Yuma, Colorado and Leoti, Kansas, said the company. The transaction faces completion of a definitive agreement and regulatory review at this point.
“Selling our two remaining feed yards aligns with our protein growth focus by allowing us to redeploy working capital away from cattle feeding operations to other investments,” said John Keating, president of Cargill’s Wichita-based protein business operations and supply chain. “By partnering with Green Plains in a multiyear supply agreement, the Yuma and Leoti yards will continue to supply cattle to our beef processing facilities at Fort Morgan, Colorado, and Dodge City, Kansas.”
The company has spent about $560m in acquisitions and capital investments to grow and support its North American protein business in the last two years, the company reported.
When completed, the sale would mean that the Minnesota-based agri-giant has no beef feed yards remaining in the US, said Mike Martin, director of communications for Cargill Protein. “This frees hundreds of millions of dollars annually in working capital otherwise required to buy, and feed, cattle, which will now be available for potential incremental investment to grow our protein business,” he added.
However, beef will continue to be a facet of Cargill’s protein business going forward, he told FeedNavigator.
“We will continue to receive cattle from these two feed yards through a multiyear supply agreement with Green Plains,” he said. “Beef remains a very important part of our protein business and global demand continues to increase.”
The feed yards to be sold can accommodate about 155,000 cattle at any time, said Cargill. Moving forward, feed sourcing decisions at the facility will be made by Green Plains, added Martin.
Approximately 90 people are employed at the feed yards are set to be offered jobs with Green Plains, Cargill said.
When asked what the new sale would mean for Cargill’s previously announced goal of cutting 20% of its use of shared-class antibiotics, or those medically important for people and animals, from its feed yards, the company said that use reduction remains important.
“We support ongoing efforts to reduce the use of medically important, shared class, antibiotics (those used for both human and animal health,” said Martin. “We work with our cattle suppliers on judicious use and overall reduction of these antibiotics.”
“We also explore alternatives (vaccines, modified feeding regiments, probiotics, essential oils, etc.) for their potential to help reduce the use of shared class antibiotics in livestock and poultry,” he said.
The reduction project, when initially announced, included efforts from the company’s remaining feed yards and four facilities operated by Friona Industries.
The move away from managing beef feed yards is expected to allow Cargill more flexibility to expand and support other work in proteins, said Martin. “We invested $50m in a new distribution center that opened early last year at our Dodge City beef processing facility,” he said.
“We also purchased a beef processing facility in Columbia, South Carolina, last year, as well as a cooked meats company – with operations in Fort Worth and Nashville – that produces many beef products,” he said. “Last week, we dedicated a cooked meats plant in Columbus, Nebraska, that was converted from a fresh ground beef plant, and will now produce cooked beef products that we did not previously have capabilities to offer our customers.”
Those efforts and others demonstrate the continued interest that Cargill has in the beef protein sector, he said. “So, as you can see, we continue to invest in beef protein to grow our business,” he added.
In recent years, Cargill also has funded projects for other types of protein development, including purchasing EWOS, as part of an investment in aqua feed and the aquaculture industry.
The sale of feed yards is not new for Cargill.
In January of 2015, the company announced it had completed the sale of a feed yard in Lockney, Texas to Lofton Trust. And, this past July, the company said that it was selling beef cattle feed yards in Bovina and Dalhart, Texas to the Amarillo-based Friona Industries.
At that time, it kept the feed yards in Colorado and Kansas, the company said. That decision also was mentioned as part of the company’s changing protein business strategy.
“Anticipating the future direction protein demand is headed, we believe it is wise to redeploy capital away from feed yard and cattle ownership to projects that enhance our capabilities and provide greater value to our customers and consumers, now and in the future,” said Keating, at the time of the Friona announcement.