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Pork Output to Drop 4%, Tyson Says

05/05/2014 @ 10:11am

A deadly virus sweeping U.S. hog farms is likely to peak this summer and could cut U.S. pork production by about 4% this year, according to the top executive of Tyson Foods Inc.

Porcine epidemic diarrhea virus, which has killed millions of young pigs over the past year, has prompted Tyson to shift the flow of animals among its plants and adjust operating hours to cope with smaller hog supplies, Tyson Chief Executive Donnie Smith said Monday.

"The big 'if' for us is what's going to happen with pork," Mr. Smith said on a conference call discussing Tyson's second-quarter earnings.

Overall, Mr. Smith said, Tyson expects its pork business, its second-biggest source of profits, to "perform well" this year.

The company's second-quarter profit more than doubled as higher average prices, particularly in beef and pork, buoyed sales. The top line exceeded analysts' expectations, but earnings fell short.

Mr. Smith had previously said he expected higher meat prices this year, with beef and pork seeing the most significant growth. Overall, prices rose 5.2% during the quarter, while volume increased 2.8%. The beef and pork segments each posted price increases of about 13%, lifting sales by 11% and 13% in each business, respectively.

The virus has struck hog farms in about 30 states and killed at least 5 million pigs, according to analyst estimates. Scientists say the virus, one of the most devastating diseases to afflict U.S. livestock in years, is fatal only to young pigs, and poses no threat to human health or food safety.

The U.S. Department of Agriculture, seeking to slow the spread of the virus, last month said it would require the pork industry to report and track all incidents of the disease.

To slow its spread, farmers have stepped up biosecurity practices, though it is difficult so far to tell how well these are working, Tyson's Mr. Smith said.

"We're pretty confident that between June and probably dipping the deepest in the [August-September] period and then recovering in October, is the right way to plan our business," Mr. Smith said, referring to hog supplies.

For the period ended March 29, Tyson Foods posted profit of $213 million, or 60 cents a share, up from $95 million, or 26 cents a share, a year ago.

Sales improved 7.7% to $9.03 billion.

Analysts polled by Thomson Reuters expected earnings of 63 cents a share and revenue of $8.84 billion.

Sales of the chicken segment grew 4% to $2.84 billion on stronger demand, partially offset by slightly lower prices.

Beef volumes slipped - as there were fewer live cattle to be processed due to a reduction in export sales - but higher prices lifted sales for the segment 11% to $3.83 billion.

Pork sales grew 13% to $1.49 billion on higher prices while volume edged up slightly on higher domestic demand.

Sales of prepared foods rose 7.2% on higher volumes, while prices slipped less than a percent during the period.

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