U.S. meat processor Tyson Foods Inc. said on May 6 that it could reap significant financial gains from an incurable hog disease that is spreading rapidly across Asia and expected to lift global pork prices.
Tyson projected its pork, chicken and beef units could all benefit from increased demand linked to outbreaks of African swine fever, after the company reported quarterly profits above analysts’ estimates.
The disease, which is fatal to pigs but harmless to humans, has been detected in China, Vietnam, Cambodia, South Africa, and parts of Europe.
With African swine fever in China, the world’s top hog producer, about 5 percent of the global protein supply has disappeared as demand is rising, Tyson Chief Executive Noel White said.
China is expected to import more protein to make up for its hog deaths, which White estimated at 150 million to 200 million pigs. The losses could help Tyson by pushing up pork prices and prompting consumers to buy more chicken and beef as alternatives, he said.
“African swine fever has the potential to impact the global protein industry on a level that we have never experienced,” White said.
The company could start benefiting from African swine fever outbreaks late in fiscal year 2019, White said.
The disease is already boosting U.S. pork and beef exports and tightening domestic supplies, chicken producer Pilgrim’s Pride Corp. said last week.
So far, though, U.S. hog prices have climbed faster than those for pork on expectations for increased Chinese demand, crimping processors’ margins.
The potential for African swine fever to enter the United States represents a risk to Tyson and its rivals, such as WH Group Ltd’s Smithfield Foods. U.S. cases would kill hogs and reduce exports.
“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.
African swine fever also could hurt Tyson by raising input costs for pork used in prepared food products.
Tyson tempered an annual outlook for its prepared foods unit to a range of 10 percent to 12 percent return on sales, from closer to 12 percent previously.
The company plans to raise prices for prepared foods over the next six months to compensate for more expensive raw materials, White said. He said higher meat costs will reduce demand among some consumers.
By Tom Polansek