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Tyson Foods Prepares For China Export Boost As It Hits Record High After Q3 Results

Tyson Foods Prepares For China Export Boost As It Hits Record High After Q3 Results
The shares of Tyson Foods Inc reached record highs following the company reporting better-than-expected for the latest quarter and reiterating its earlier forecast that it would make profit because of the spread of a fatal hog disease in China.
Tyson Chief Executive Noel White said that the company is yet to make any significant financial gains from the spread of African swine fever in China among pigs which has resulted in the deaths of millions of pigs there. Currently the stock of frozen meat supplies is still be used to meet demand for pork in China but according to White, the country could soon start to enhance its import of US pork as there would be a shortage in supply as early as October of this year.
While African swine fever causes death of pigs, it does not cause any harm to humans. It has also not been found in the United States.
A trend of Chinese consumers to look for other sources of protein could also result in China increasing the total imports of beef and poultry. That trend can be beneficial for Tyson because if also produces beef and chicken in addition to pork. "I think that all of the proteins will benefit," White told analysts on a conference call.
White said that negotiations with meat buyers in China, the world's largest hog producer and pork consumer, is already being held by the company.
Last year, import tariffs on imports of American farm products including pork were imposed by China in retaliation to US tariffs on Chinese goods in the wake of te US-China trade war and since then the import of the animal meat by China has not be as the industry had expected.
"As China depletes its frozen inventory and starts tapping into the global pork supply in a more meaningful way, we expect Tyson to start realizing meaningful upside, likely in early FY20," Bernstein analyst Alexia Howard said.
However profits for Tyson could be impinged by higher corn price which is purchased by the company as chicken feed. The quantum of production of the crop this year in America is uncertain because unseasonal and widespread floods in the spring resulted in unprecedented plantings delays.
Tyson’s Chief Financial Officer Stewart Glendinning said that the company expects that there would be an increase of between $150 million to $200 million in the price of the grain compared to the costs the company incurred last year.
A rise in corn futures, which the company leveraged to enhance its position in the grain market, resulted in the company recording a $40 million gain in its chicken unit for the third quarter of the current year ending June 29. Glendinning said that as corn prices have pulled back, much of that profit is likely to be reversed in the fourth quarter.
In the quarter, the company reported a net income attributable to Tyson increase to $676 million, or $1.84 per share, compared to $541 million, or $1.47 per share, in the same period a year ago.

Christopher J. Mitchell

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