Union representatives at UFCW7 said in a press release that employees at JBS's beef processing plant in Greeley, Colorado agreed to end a three-week strike and will return to work on Tuesday, after the company pledged to restart contract discussions. Negotiations between JBS and the workers' representatives are slated to recommence on Wednesday and Thursday.
JBS, through a company representative, indicated it would not revise the initial proposal it submitted to the union and intends to keep that original offer as its final position in the talks.
Morgan Stanley analysts expect the gradual resumption of production at the Greeley plant to prompt a partial pullback in U.S. beef spreads. The analysts emphasized that the ultimate impact will hinge on the outcome of the negotiations later in the week.
The financial picture for U.S. beef spreads has shifted notably this year. From a low of negative $140 per head in mid-February, spreads improved to roughly $390 per head at their peak, with readings near $250 per head last week. Morgan Stanley noted several contributors to the improvement, including typical seasonal patterns and producers cutting slaughter rates after suffering negative margins in January and February. During those months, average beef spreads were negative $45 per head.
The analysts highlighted the strike at the Greeley facility as the most significant factor behind the recent improvement in profitability. The plant processes about 5,000 head per day, which Morgan Stanley estimates represents roughly 5% of industry capacity. The strike likely reduced demand for slaughter, placing downward pressure on cattle prices, while lower availability of beef pushed cutout prices higher.
As capacity utilization at the Greeley plant ramps up, Morgan Stanley expects some reversal of the spread gains, forecasting a partial pullback on U.S. beef spreads in the near term. That development would be a negative for short-term margins at large processors, including JBS and Marfrig.
Key details remain dependent on the course of the resumed bargaining sessions, and market participants will monitor both production throughput at Greeley and any substantive movement in the company-union negotiations.