When Smithfield Beef Group (SBG) and ContiGroup Companies (CGC) joined forces last year to create the world's largest cattle-feeding company -- Five Rivers Ranch Cattle Feeding -- both logic and simmering rumors suggested it would be just a matter of time before the partnership evolved into vertical coordination with packing. That time has come.

Last week, the two companies announced plans to construct, in partnership, a $200 million -- 5,000-head/day-capacity -- packing plant in Texas County, OK, near the town of Hooker.

"We selected Texas County because of its proximity to nearby feed yards, the availability of water supply, the area's outstanding labor pool and well-developed utility and transportation infrastructures," explains Richard V. Vesta, SBG president and CEO.

"We expect to source cattle for the plant from the plentiful nearby supply of livestock, including the surrounding Five Rivers feed yards, which we believe will save considerable transportation expense," says Vesta. "Access to these cattle also will be valuable in terms of traceability, an increasingly important issue in the U.S. and in export markets..."

As the first beef-packing plant of its size constructed in the past 20 years, newer technology should also serve up lower-cost opportunities. Construction on the facility is supposed to begin in January 2007, with completion scheduled for mid 2008. Vesta says the plant will provide 2,500-3,000 jobs.

The plant is being built smack in the middle of the densest regional population of fed cattle. If you assume the majority of cattle fed by Five Rivers will flow through the new plant, Five Rivers' fed-cattle production capacity would go a long ways toward meeting the new plant's needs for cattle -- about 1 million head/year.