March 21, 2011

Tyson and Smithfield to boost Japanese meat exports

Tyson Foods Inc. (TSN), the largest meat processor in the US, and Smithfield Foods Inc. (SFD), the world's biggest pork processor, are likely to increase shipments to Japan as the country's production is disrupted by the natural disaster, analysts said.

Japanese demand for imported pork will increase in coming months, an analyst said. Supplies of pork and beef in the US are already tight and higher shipments to Japan may boost prices, said another analyst.

"Significant inventory replenishment is required near term given empty supermarket shelves and Japan's protein production is disrupted," the third analyst said. "Tyson and Smithfield have indicated that export traders are requesting as much product as possible be shipped to Japan."

Last week's earthquake and tsunami damaged feed plants and slaughter houses and caused power outages and fuel shortages, thus, hindering livestock output in affected areas, said Susumu Harada, a senior director at the Tokyo office of the US Meat Export Federation. Prefectures with damage include Iwate, Miyagi and Fukushima, which represent about 9% of Japan's hog herd and 10% of beef cattle, according to the group.

Japan is the world's largest pork importer and the biggest export market for Smithfield, accounting for 43% of its shipments, according to Smithfield. International sales made up 11% of its fiscal 2010 revenue. The country is also the leading destination for Springdale, Arkansas-based Tyson's pork exports.

Japanese protein demand may still drop, the fourth analyst said. That would present a large risk for US producers, he said.

"We are not subscribers to the theory that the Japanese may be buying a lot of meat to keep in freezers near-term," he said.

US retail ground beef prices rose 17% to almost US$2.66/pound in the year through February while pork chops rose 8.5% to $3.48/pound, according to USDA.
 

Gary Mickelson, a Tyson spokesman, said the company has not experienced any disruption to shipments to Japan and its Tokyo sales office is operating and fully staffed.

"Our export business to Japan remains steady," Mickelson said. "It remains premature to predict how the unfortunate situation in Japan will affect our export sales."