Ethanol producer Green Plains to acquire cattle feed yards from Cargill

Nebraska-based, US ethanol producer Green Plains has announced that its subsidiary, Green Plains Cattle Company, has entered into an asset purchase agreement to acquire two cattle-feeding operations from Cargill for $36.7 million (€33.6m), excluding working capital.

The transaction includes feed yards located in Leoti, Kansas and Yuma, Colorado and will add capacity of 155,000 head to the company's operations. Upon completion of the acquisition, Green Plains Cattle Company will become the fourth largest cattle-feeding operation in the United States with total capacity of more than 255,000 head.

As part of the transaction, Green Plains Cattle will also enter into a long-term supply agreement with Cargill Meat Solutions to provide a reliable supply of cattle from the Leoti and Yuma locations, as well as Green Plains' existing feedlot in Kismet, Kan., with appropriate flexibility and economic opportunities for both parties.

"The growth of Green Plains Cattle achieves one of our strategic initiatives of further diversifying our income streams and investing in adjacent businesses. This purchase also aligns with our overall strategy to meet growing global protein demand in downstream markets that take advantage of our supply chain, production platform and commodity management expertise," said Todd Becker, president and chief executive officer of Green Plains.

Becker added: "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."

Green Plains Cattle Company currently owns a 70,000 head cattle-feeding operation near Kismet, Kansas and a 30,000 head operation near Hereford, Texas.

Co-products

"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 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. Since our entry into cattle feeding a few years ago, the meat and protein market fundamentals have remained favourable and the business has been accretive to Green Plains' earnings." 

The Leoti and Yuma cattle-feeding operations consist of approximately 1,900 acres of land, supporting infrastructure and feed storage assets, which are strategically located near major meat packers. The transaction is anticipated to be accretive to 2017 earnings with completion expected in the next 30 days, subject to customary closing conditions and regulatory approvals.