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Vol. 12, No. 112 / June 10, 2014 JBS Swi and workers at its Worthington, MN pork plant have
reached agreement on a new 5‐year labor plan. Members of the United Food and Commercial Workers Union (UFCW) ra fied the agreement which the union claims will pump $23 million dollars into the local econo‐
my over the next five years. The plant’s former agreement expired June 30, 2013 and the union had authorized a strike a few weeks ago if nego a‐
ons did not yield an acceptable contract. The UFCW website says the agreement will provide wage increases of 12.8% over 5 years and main‐
tain affordable health care costs for employees. The plant employs about 1800 workers and has a capacity of 20,000 head per day. From a market perspec ve, the agreement means that opera ons at the plant will not be impacted. While a strike this summer would not likely have much impact on hog prices, any disrup on in the fourth quarter of a year could. That risk is much lower this year due to lower hog numbers. This week’s Crop Progress report from USDA con nues to indi‐
cate that 2014 crops are off to a great start. USDA discon nued re‐
por ng corn plan ng progress as it had reached 95% of acres last week and is apparently judged complete. A en on will now focus on the condi‐
on of the corn crop and USDA says that 75% of the crop is in good or excellent condi on at this me. That is down 1% from last week but, as can be seen at right, is well above last year’s 63% good/excellent ra ngs and near the highest levels since 1990. The caveat, of course, is that most crops are judged to be in pre y good condi on at this early phase of the growing season. Most crop risk is s ll ahead but you take it one step at a me and the early steps this year have been successful! Soybean plan ng now covers 87% of intended acres. That com‐
pares to 78% last week and a 5‐year average of 81%. One year ago, only 69% of the soybean acres had been planted at the end of week 23. Seven‐
ty‐one percent (71%) of soybeans have emerged. That figure compares to a 5‐year average of 62% and only 46% one year ago. USDA’s first 2014 es mate of soybean condi on pegs 74% in the good or excellent catego‐
ries and only 4% in the poor of very poor categories. Winter wheat condi ons remain poor na onally and in some very important growing areas. Forty‐four percent of the crop was s ll rated as in poor/very poor condi on as harvest progressed to cover 9% of total acres. The condi on ra ngs for this crop are almost iden cal across the board to ra ngs at the same me last year. The kicker, of course, is that the worst ra ngs are in the biggest winter wheat states with 76% of the crop in Oklahoma, 63% of the crops in Kansas and Texas and 38% of the crop in Colorado rated in poor or very poor condi on. The so red wheat of the eastern Cornbelt and Southeast is in MUCH be er condi on. It appears the ba le for Hillshire Brands is over and Tyson is
the winner. Pilgrims Pride announced yesterday that it would not in‐
crease its bid for Hillshire, meaning that Tyson’s $63/share ($8.55 billion CORN CROP CONDITION
Percent rated Good or Excellent
100
90
80
BEST SINCE 1990
2014
2013
70
60
50
10-yr average
40 WORST SINCE 1990
30
2012
20
10
0
total) bid will win the ba le that has been ongoing for two weeks. Hill‐
shire’s board had taken no ac on on the offer and issued a statement saying that it s ll had an agreement to buy Pinnacle Foods but we expect that will go by the wayside and the Tyson buyout will be completed. The $163 million break‐up fee with Pinnacle is included in Tyson’s offer. This is a major move for Tyson, adding top‐ranked brands to its “red” meats product lines. Jimmy Dean sausage is among the top na on‐
al brands for breakfast sausage and sandwiches. Di o for Ballpark franks and Hillshire Farms smoked sausages. Tyson CEO Donnie Smith told ana‐
lysts Monday that the acquisi on would result in about $300 million in synergies and be a stabilizing factor for its pork business. We agree with that last statement given the vola le nature of wholesale pork markets. Most pork companies — including Tyson and its former IBP pork business — have for many years pursued a strategy of adding value to raw pork products by processing them into branded prod‐
ucts. Oscar Mayer did it in spades and eventually decided to exit the kill‐
cut business and purchase raw ingredients. Hormel has been very suc‐
cessful by pu ng its name on virtually everything it sells including Spam, Black Label bacon and Cure 81 hams — all well known, recognizable brands. Tyson has done the same in the chicken business. But building brands internally is a long, long process that can cost millions and millions of dollars. It is not o en that an opportunity comes along to grasp top brand names in several categories that all use, to some degree or another, the raw materials already being produced within the company. Tyson‐
Hillshire appears to be a great fit. Whether it is an $8.55 billion great fit remains to be seen. We don’t mean to be nega ve with that statement. $8.55 billion is just a lot of money! The Daily Livestock Report is made possible with support from readers like you. If you enjoy this report, find if valuable
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