September 10, 2004



High Beef Prices Hurting Tyson's Sales

Tyson Foods Inc., the world's largest meat company, said that high beef prices may have consumers shifting to pork and chicken. But its beef segment should do well later this year.


"There is price fatigue on beef. Beef has gotten pretty high. The flip side of that is they move over to pork and they move over to chicken," according to John Tyson, president and chief executive.


Supermarket beef prices have been high much of the year. This is because production is down about 10 percent and demand has been strong in part due to the popularity of high-protein diets.


In July, the average supermarket beef price compiled by the U.S. Bureau of Labor Statistics was $3.698 per lb, up 12 percent from a year ago. The figure is close to the record high of $3.70 set in December 2003.


"When the customer moves their protein spending around we are in a position to capture that," said Tyson, whose company is the nation's largest chicken producer and a major pork producer.


The beef segment is the largest of Tyson's operations accounting for almost half of the company's $24.5 billion in fiscal year 2003 sales. Chicken accounted for 30 percent, pork 10 percent, and prepared foods 11 percent.


"We are very comfortable it will be a positive business for us," said Tyson of the beef. "We think there will be more cattle available starting at the end of December and in January."


This year's smaller beef production has been partially offset by a severe drop in exports after foreign buyers, including top buyer Japan, banned U.S. beef because of a case of mad cow disease there in December 2003.


The United States has been in talks with Japan to lift the ban. But Tyson said he does not expect that to happen until early next year. Japan took about a third of U.S. beef exports before the bans.


The United States' ban on imports of Canadian cattle is also hurting beef companies. The ban has been in place since Canada's mad cow case in May 2003. Beef plants in the U.S. northwest had used Canada cattle.


"As for the supply of live cattle coming down from Canada into the U.S. we don't believe that issue will be addressed until after the election. At that time, we do believe that there will be some progress made," said Tyson.

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