The J.R. Simplot Company has announced that it will permanently close its Hermiston, Ore., potato processing plant in a phased shutdown over the next nine months.
The plant and related support operations at Hermiston employ 625 people.
The closure results from flat-to-declining demand for frozen potato products in both domestic and global markets served by the Hermiston facility.
James Munyon, Simplot Food Group President, said the absence of market growth presently, and projected over the next several years, has created industry-wide overcapacity.
The closure of Hermiston, while an extremely difficult decision, will enable us to operate our other plants at higher capacity, thus more efficiently, and further strengthen our competitive position,” said Munyon.
“It will have a definite impact on our growers,” said William Wise, secretary of the Oregon Potato Commission.
Oregon growers supplied a good percentage of the potatoes the plant processed, Wise said. Processing has traditionally been the biggest consumption component of potatoes grown in the state.
One of the plant’s processing lines will be permanently shut down at the conclusion of processing the 2003 potato crop in June, when the entire plant will experience a scheduled shutdown. The closure of that line will result in approximately 125 permanent layoffs.
In July, the facility’s remaining processing lines will resume operation. Based on market considerations and the availability of the plant’s workforce, those lines will remain in production until late November. The final job eliminations, totaling approximately 500 employees, will occur at that time.
Munyon said processing of the products from Hermiston would be transferred to other plants within the Simplot system. The Company has potato processing operations at Othello, and Moses Lake, Washington; Caldwell, Nampa and Aberdeen, Idaho; Grand Forks, North Dakota; and Portage La Prairie, Manitoba, Canada.
Munyon said this decision is neither a reflection on the Hermiston plant workforce nor the grower base, which supported the operations.
“We greatly appreciate the efforts of both our employees and our growers,” he said. “Changes in the industry and marketplace dictate that we take this action to remain competitive.”
The Hermiston plant and adjacent support services presently employ 625 individuals 578 hourly and 47 salaried. The June layoffs will be based on seniority and job qualifications.
Munyon said that although fewer potatoes will be needed at Hermiston from the 2004 crop, no reduction in volumes contracted with growers would be made this year. The potatoes not processed at Hermiston will be used at other Simplot plants.
He said the number of contract growers and acreage will decline for the 2005 crop year, but the precise impact cannot be determined at this time.
Acreage supplying the plant is concentrated in Umatilla and Morrow counties of Oregon, and Benton, Franklin and Walla Walla counties of Washington.
Simplot, a privately held food and agribusiness company based in Boise, Idaho, constructed and has operated the Hermiston plant since 1977. The 225,000 square-foot facility is located on a 400-acre site, five miles southwest of the city of Hermiston.
Wise said that is possible that the processing plant could eventually get picked up and purchased by another processor. The commission may consider promoting that sale.
In addition, Wise said the group would continue to promote fresh sales and exports. Last year, the state saw a 3,000 percent growth rate in exports to processors in Asia. But, Wise said, that the percentage might sound more impressive than it is because it has grown from a small base.
Nonetheless it is a new market, he said. “We’re always active in trying to create new markets for all of the potato products.”