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Tyson Foods sees benefits as swine fever ravages Chinese hog farms

  • Tyson CEO Noel White says African swine fever has taken 5 percent of the global pork supply out of the marketplace.
  • That's 150 million to 200 million hogs in China, the No. 1 producer, alone.
  • He made the comments on a conference call today to discuss the U.S. meat producer's earnings, which beat expectations.

Springdale, Ark. - African swine fever -- a deadly disease for pigs but not harmful to people -- may be devastating hog producers in China, but Tyson Foods CEO said on Monday the U.S. food giant sees this plague as a plus for its protein business. China is the world's leading hog producer, but the disease is also striking hog farmers in other countries, including Vietnam and South Africa.

Tyson CEO Noel White noted during an earnings conference call how African swine fever is affecting pork prices and that Tyson expects to benefit as prices climb as pig stocks get culled. Investors took note of Tyson's expectation-beating quarterly results and White's comments about supply, and drove the company's stock price to its 2019 high.

"This is an unusual, perhaps unprecedented time for the protein industry," said White. "In my 39 years in the business, I've never seen an event that has the potential to change global protein production and consumption patterns as African swine fever does."

White added that he sees Tyson as "uniquely positioned" in its beef, pork and chicken businesses "because you don't have an incident like this, where there's some place in the vicinity of 150 million to 200 million hogs that have died in China, that there's not a significant impact."

5 percent of the global total

Put in perspective, White noted that this amounts to "about 10 million metric tons of product that has come out of the marketplace." He said "that's something in the area of 5 percent" of the global total.

That's set to not only push pork prices higher but lead many consumers to switch to beef and chicken. All those impacts would benefit Tyson, according to White.

For its fiscal second quarter, Springdale, Arkansas-based Tyson reported net income of $426 million, for earnings per share of $1.17. After adjustments for costs related to mergers and acquisitions and restructuring, earnings were $1.20 per share.

The results beat expectations of $1.12 per share among Wall Street analysts surveyed by Zacks Investment Research. The meat producer posted revenue of $10.44 billion in the period, also beating Street forecasts of $10.23 billion, according to Zacks. Looking out to its full-year earnings, Tyson sees them in the range of $5.75 to $6.10 per share.

The company's shares have risen 41 percent since January, while the S&P 500 index has risen 18 percent. The stock has climbed 12 percent in the last 12 months and closed on Monday up 2.6 percent, or $1.96, at $77.05.

On the downside, White also noted that things could change if the disease were to spread to the U.S.: "The rate in which it has spread over the course of the last 12 months makes it very plausible that it could come to the United States."

White said Tyson's full-year forecasts don't factor in potential effects from African swine fever because "we do not have clarity on when the impact might occur or what the magnitude could be." He added that pork price increases are so far trailing higher hog costs. That's "leading us to believe any positive ASF impact would occur in late fiscal 2019 into fiscal 2020 and beyond."

--With reporting from The Associated Press.

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