December 25, 2008

Tyson Foods will cut both beef and chicken production, the second of which would affect the poultry industry significantly, according to an analyst.

Industry analysts estimate that Tyson will cut chicken production by 4-6 percent.

While the beef production cut is positive, the chicken cut is significant as it is the first time in the 12-month industry downturn that Tyson is willing to rationalise production, said analyst Farha Aslam from Stephens Inc.

Aslam said Tyson has a 20-25 percent market share, which indicates its production cuts could have a significant impact on the poultry industry's supply and pricing.

A 5-percent cut by Tyson would amount to 1- to 2-percent fewer poultry pounds produced for the industry, expanding the industry production cuts that range from 6-8 percent, based on egg sets.

The cut will also increase share prices of Tyson and Sanderson Farms, said Aslam, adding that better discipline in the poultry market is favourable for the profitability of the beef and pork markets.

Tyson spokesman Gary Mickelson said while company would rather not share details of their current poultry production levels, it would continue to closely evaluate market conditions to match customer demand with its supply.