Cargill is exiting the cattle feeding business by selling its two remaining feedlots to Green Plains subsidiary Green Plains Cattle Company for $36.7 million.
The feedlots, located in Leoti, Kansas and Yuma, Colorado, have capacity for 155,000 cattle at any given time. The price of the existing cattle will be determined when the deal closes, a Cargill spokesperson told Agri Investor.
Cargill is exiting the cattle feeding business to free up additional working capital to grow its North America protein business, which the global food and agri company has already spent $560 million on through acquisitions and capital investments over the past two years, according to a company statement.
Under a new multi-year agreement, the company said Green Plains will supply cattle to Cargill’s beef processing facilities in Fort Morgan, Colorado, and Dodge City, Kansas.
The acquisition makes Green Plains Cattle Company the fourth largest cattle feeder in the US, that company said in a separate statement. The company currently owns a 70,000 head cattle feeding operation near Kismet, Kansas and a 30,000 head operation near Hereford, Texas.
Todd Becker, president and chief executive officer of Green Plains, noted that one benefit of the transaction is the synergy between the additional cattle and the feed produced at company-owned ethanol plants. He said the company’s cattle business will now consume more than 300,000 tons of dried distillers grains and 40 million pounds of corn oil annually.
“The ability to effectively control our feed supply cost provides our cattle business with a strategic operating advantage resulting in more predictable and stable cattle-feeding margins while enhancing Green Plains’ knowledge of ration dynamics,” he said. “Since our entry into cattle feeding a few years ago, the meat and protein market fundamentals have remained favorable and the business has been accretive to Green Plains’ earnings.”
The transaction is expected to close this month.