Tyson Foods (NYSE:TSN)
Historical Stock Chart
6 Months : From Jul 2019 to Jan 2020
By Lucy Craymer and Jacob Bunge
China is on a global meat-buying spree, pushing up beef, pork and poultry prices around the globe as the world's most populous nation scrambles to fill a large void in its meat supply.
Meat buyers for China are ramping up purchases after a swine disease hit hog farms across the country and reduced his pig herd--the world's largest--by more than a third. Domestic pork prices have surged and China's meat imports are swelling in response, straining global supplies and sending ripples across the global economy.
In Brazil, poultry shipments to China have jumped 31% from a year ago and retail prices for chicken breasts, thighs and legs have increased roughly 16%. Shoppers in Europe are on average paying 5% more for pork, because more domestically produced meat is being sent to China. Lamb prices in Australian grocery stores have jumped 14%, while ground beef on shelves in New Zealand now fetches record prices.
China's world-wide hunt for meat means that in Melton Mowbray, a British town of some 27,000 people known for its pork pies, prices for the thick-crusted pastries are going up. The U.K.'s Agriculture and Horticulture Development Board, a farmer-funded body, in September said Chinese demand helped push domestic hog prices to their highest level since November 2017.
One of the town's bakeries, Dickinson & Morris, has increased prices of pies filled with uncured British pork by 10% to 15% to GBP3.99 ($4.98) for an individual pie, to help offset a 26% rise in wholesale meat prices.
"There is just not enough pork around," said Stephen Hallam, managing director of the company, which sells about 4,000 pork pies a week at its store and distributes them to other retailers.
China's heavy buying is the result of the country's yearlong struggle to control the spread of the deadly African swine fever virus, which has led many farmers to cull hog herds and stop breeding new pigs. The country is now facing a historic pork shortfall while it remains locked in a trade war with the U.S., whose food and agriculture exports to China have plunged following rounds of tit-for-tat tariffs.
American shoppers so far haven't felt much price impact from China's meat purchases, but that could soon change. December-dated U.S. lean hog futures have climbed 4.5% so far this month, rising after Chinese officials said the country could exempt U.S. pork and some other agricultural goods from punitive tariffs, though President Trump on Friday said the U.S. didn't need to complete a trade agreement with China before the 2020 election.
Many U.S. meat companies watched over the past year as competitors in Europe and South America raced to supply China's pork needs. In time, executives of Tyson Foods Inc., Smithfield Foods and Sanderson Farms Inc. said they expect to benefit from higher prices, as China's rising imports draw down global meat supplies.
"Anytime that there is that amount of protein that is lost from a global perspective, there is going to be an impact on price," Noel White, Tyson's chief executive, said during a September investor conference.
Chinese consumers eat 122 billion pounds of pork a year primarily in dishes such as dumplings, meatballs and stir-fried dishes. The vast majority of that has previously been sourced locally. Analysts are now estimating that swine fever will cut China's pork production by as much as 35.7 billion pounds in 2019--which is almost double the amount of pork traded internationally last year.
As domestic pork prices have jumped as much as 50%, there have been some attempts by Chinese government officials to ration pork or encourage people to buy chicken and other meats instead.
Between May and July, Chinese imports of pork, chicken, beef and sheep meat jumped nearly 70%, totaling more than $5 billion in value, pushing up meat prices around the world. The United Nations Food and Agriculture Organization's global meat price index, which takes in price movements of beef, sheep meat, pork and poultry, has climbed 10% this year to its highest level since early 2015.
In Brazil, Beijing officials recently approved an additional 25 meat processing factories to export meat to China, increasing the number of export-certified Brazilian meat plants to 89--including a donkey-processing facility--according to a statement by the Brazil's Ministry of Agriculture, Livestock and Supply.
BRF SA, one of Brazil's largest meat processors and poultry exporters, is increasing export capacity of pork and chicken by about 30% in part to meet Chinese demand while keeping the local market supplied.
Chinese importers are looking to buy three times the amount of meat they usually purchase, said Patricio Rohner, BRF's international vice president. Brazilian consumers are paying more for chicken as a result and further price increases are possible, he said.
In neighboring Argentina, where many consider beef a way of life, some locals are going without the red meat as prices surge. A combination of inflation and soaring exports to China--beef shipments more than doubled this year, while poultry climbed 68%--have pushed steak prices 51% higher compared with a year ago, according to industry data.
At Cafe Anselmo, a restaurant in Buenos Aires' historic San Telmo neighborhood, menu prices for sirloin steaks and milanesa are one-fifth higher than they were at the beginning of the year, said manager Amorina Orosco. Some residents are buying less meat, and "all of us expect the prices are going to increase," she said.
ElPozo Alimentación SA, one of Spain's largest pork companies, is making decisions about how much of the meat to supply to domestic markets and what to send to China, where it can get more money. In Spain, even cheaper cuts of meat--such as pig trotters--are disappearing from the local market because they can be sold for much more in China, said John Hickin, regional sales director in Asia for ElPozo.
Simon Linke, an export manager at trading firm Samex Australian Meat Co., said Chinese buyers are outcompeting U.S. and Middle Eastern importers to lock up Australia's meat supplies.
In North Sydney, Australia, Tender Gourmet Butchery is feeling the effects of China's hunger for meat. Store manager Ron Bergan said lamb has become so expensive that the store can't pass all its cost increases on to customers without losing sales.
Instead, he said, the store is reducing its profits. He is selling lamb cutlets for about $20.29 a pound--roughly 10% more than a year ago.
"Nothing is easy in the meat industry," said Mr. Bergan, noting that domestic supplies had already been tight after droughts reduced the size of Australian cow and sheep herds.
Write to Lucy Craymer at Lucy.Craymer@wsj.com and Jacob Bunge at email@example.com
(END) Dow Jones Newswires
September 23, 2019 07:17 ET (11:17 GMT)
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