May 1, 2017

Cargill announced it has agreed to sell its last two remaining cattle feed yards located in Leoti, Kansas, and Yuma, Colorado to Green Plains Inc.- a vertically integrated ethanol producer with feed lot operations in Kismet, Kansas, and Hereford, Texas, for $36.7 million.

The move will enable Cargill to completely exit the U.S. cattle feed business, and will give the company additional capital to allocate toward other investments that will strengthen its North American protein business through expansion into plant-based proteins, insect proteins, and aquaculture.

“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.

The deal to sell the Leoti and Yuma feed yards comes less than one year after Cargill announced it decision to sell its lots in Bovina and Dalhart, Texas, to Friona Industries. It also follows a string of exits and divestments of lower-margin assets including the sale of its ag-retail unit to Calgary-based Agrium; the sale of its condiments business to Ventura Foods; its exit from the crop inputs business in Central and Eastern Europe; and the sale of its U.S. pork business to JBS USA in 2015 for $1.45 billion.

However, the company also has deployed approximately $560 million for acquisitions and capital investments along its North American protein supply chain over the past two years.

Prior to the sale of its feed lots, Cargill had a capacity of 293,000 head at its four locations, and was the fourth largest cattle feed in the country, according to CattleFax. Now, upon closing of this deal, that ranking will belong to Green Plains, which will have total capacity exceeding 255,000 head.

For Green Plains, the deal is highly synergistic – providing an integrated use of the distillers grains and by-products created through its ethanol production as feed for cattle production. 

Under the terms of the deal, Green Plains also will enter into a long-term supply contract with Cargill Meat Solutions to be a supplier of cattle from the Leoti, Yuma, and Kismet sites, and will offer jobs to the 90 Cargill employees at the Leoti and Yuma locations.

“A key component of the acquisition is the long-term agreement with Cargill under which Green Plains Cattle will be a strategic supplier of their beef-packing demand,” Todd Becker, president and chief executive officer of Green Plains, told Biofuels International.

“One of the inherent benefits of this transaction is the scale of internal demand for our co-products produced at company-owned ethanol plants. Our cattle business will now consume more than 300 thousand tons of dried distillers grains and 40 million pounds of corn oil annually,” Becker added.

The deal is also a positive one for Cargill, which sees the deal supply agreement as bringing the company one step closer to its streamlined structure.

“We are committed to being the leading protein provider that nourishes people, animals and the planet in a safe, responsible and sustainable way while exceeding the expectations of our customers,” said Keating.  “We have great positive growth momentum and are confident it will continue to accelerate as we continue to help our customers’ and suppliers’ businesses, communities and colleagues thrive.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.