Tyson also discussed new DNA technology that will be used to track beef packaged under the Open Prairie Natural brand
Tyson Foods Inc. says its pork business will benefit from the African swine fever that has slammed China, it just doesn’t know when.However, from Farm Journal:
For now, the company is projecting that the pork segment’s operating margin will surpass 6% for the fiscal year.
“It is difficult to predict when African swine fever might positively impact our pork business,” said Noel White, chief executive of Tyson TSN, -0.26% , according to a FactSet transcript. “However, we believe any financial benefit will likely occur in late 2019 or later.”
African swine fever is hitting China, and the meat industry, hard. For meat producers outside of China, the disease, which is deadly to animals, there’s opportunity.
Pork production in China is expected to drop by 25% to 35%, according to Rabobank data quoted in The Wall Street Journal. China is expected to increase imports of other proteins.
Tyson stock has soared 44% for the year to date, far outpacing the S&P 500 index SPX, -1.65% (up 15.1%), the Invesco Dynamic Food & Beverage ETF PBJ, -1.05% (up 13.3%), and the Dow Jones Industrial Average DJIA, -1.79% (up 11.8%).
“News of African Swine Fever in China, along with the increased slaughter capacity in the United States, had a near-term impact of driving up hog costs that initially outpaced the value of pork,” said White. “We’re achieving reasonable returns despite the headwinds while improving our spread to the USDA industry benchmarks versus a year ago.”
African swine fever gave Tyson’s chicken business a bump, and positioned the company well for contract discussion for this year and next, according to White.....MORE
China’s Love of Pork May Not Be Enough
Everyone knows that China loves pork. Pork accounts for more than 60% of meat consumption in the country. But American Farm Bureau Federation economist Michael Nepveux says the love of pork might not be enough.
As the largest producer and consumer of pork, China claims almost half of the world’s consumption of this protein source. To put it into perspective, Nepveux says the global annual pork trade is only equivalent to about two months of Chinese consumption.
In light of the African swine fever (ASF) outbreak in China, the country is increasing its pork imports, even purchases from the U.S. in spite of high tariffs on the product. Since mid-February, China has made purchases of over 146,000 metric tons from the U.S., with a major 78,398 MT purchase made the week of April 5.
Although sales can still be cancelled, cumulative exports this year are already trending significantly above 2018 and seem poised to continue to do so, Nepveux says.
“It is also important to not get too far ahead of ourselves in terms of these large disparities between China’s expected production and its consumption needs,” Nepveux says. “China has quite a large amount of pork in stocks to draw from. While the country is eating through them quickly, we should not expect to see an extreme spike in global trade to come until later this year or even potentially early 2020.”
China continues to ban pork imports containing ractopamine, meaning pork in the U.S. will have to come from the approved plants that produce this specific product.
There’s no denying Chinese consumers will still demand pork, but experts expect consumers to substitute other animal proteins for pork. Poultry is poised to benefit the most from Chinese consumers searching for alternative protein, Nepveux says.
“Chicken producers can respond more quickly and ramp up production faster than producers of beef or pork, chicken’s primary competition in the protein market. It typically will take six weeks to grow a bird to market weight, compared with four-five months for pork and 18 months for beef. It is also because chicken may be less of a jump for some consumers in terms of a substitution,” he says....MORE
