(Updates with details on plant, analyst comments)
By Tom Polansek
CHICAGO, Jan 29 (Reuters) - JBS USA, one of the top U.S. meat processors, said on Thursday it will expand a Utah beef-processing facility, even as some of its rivals have been shuttering plants because of tight cattle supplies.
The $75 million project, set to be completed by mid-2016, signals JBS is looking beyond the current lack of supply to a time when producers will begin rebuilding cattle herds, which have dropped to their smallest size since 1951 after several years of drought.
Once the facility is expanded, JBS projects there will be enough cattle available to increase production at its Hyrum, Utah, facility by more than 400 head a day, or about 20 percent, spokesman Cameron Bruett said.
“We certainly wouldn’t make this type of investment if we didn’t think there would be cattle there,” he added.
In addition to increasing production, JBS said it will modify the facility so it can process dairy cattle for the first time to meet increasing demand for ground beef.
The 79-year-old plant processes nearly 500,000 cattle per year, which represents about 2 percent of last year’s total U.S. slaughter of steers and heifers, said John Nalivka, president of Sterling Marketing in Vale, Oregon.
Expanding beef-processing facilities is “the right thing to do if you have the right plant and you’re looking down the road,” Nalivka said.
JBS’ Utah plant, which exports about 20 percent of its production, is in “an ideal location for expansion to service the ever-growing beef market in the western U.S.,” said Bill Rupp, president of JBS USA Beef, in a statement.
Still, U.S. producers are not likely to rebuild the cattle herd enough to increase supplies until after JBS completes its project, said Steve Swigert, an agricultural economics consultant for the Noble Foundation. It takes around two years to raise a calf to maturity.
On Friday, the U.S. Department of Agriculture will issue an annual Cattle Inventory Report that is expected to show the size of the herd has stabilized after a seven-year decline.
Cargill Inc closed a beef-processing plant in Wisconsin last year and a beef plant in Texas in 2013 because of the scarcity of cattle. National Beef Packing Co last year closed a California beef-processing plant. (Additional reporting by Theopolis Waters in Chicago; Editing by James Dalgleish and Alan Crosby)