Tyson cuts US meat output hopes, citing hog virus

Tyson Foods warned it may be forced to curtail pork processing operations thanks to the shortfall in hog availability caused by a virus outbreak, cutting expectations for beef and chicken supplies too.

The biggest US meat group on Monday raised to 4-5%, from 3%, a forecast for the drop in domestic hog supplies in the year to the end of September, its fiscal year, thanks to the spread of porcine epidemic diahorrea virus (PEDv).

Donnie Smith, the Tyson Foods chief executive, calling PEDv the "big concern in pork", said that the group had begun in the first three months of calendar 2014 to notice a "supply reduction" in hogs, which was only partially offset by heavier slaughter weights.

And a further downturn was expected, with Mr Smith said that "the impact of PEDv is expected to further affect our hog supplies beginning around June 1, peaking in August and then beginning to ease in October".

Tyson Foods would "need to adjust our operating hours accordingly".

Beef squeeze

The comments came as the group - unveiling quarterly profits which reflected a sharp improvement on a year before, but fell short of market expectations prompting a large drop in Tyson shares cut forecasts for US meat production overall in the year to September, seeing a drop of 1%.

In January, the company forecast a rise of 1%.

The downgrade also reflected a forecast of a 3-4% drop in supplies of fed cattle over the year, compared with a previous estimate of a 2-3% fall.

Beef supplies are being limited by the small size of US cattle numbers, its weakest since 1951, at a time when higher animal prices, and lower feed costs, are spurring many producers to rebuild herds, exacerbating the competition for animals.

'Very strong demand pull'

In chicken, while Tyson continued to forecast a rise in production over the year, the forecast for the rate of increase was trimmed to 2-3% from 3%, reflecting "tight breeder supplies".

And even that estimate was termed by BMO Capital Markets analyst Ken Zaslow as "higher than most of the industry that we're hearing from".

US chicken group Pilgrim's Pride last week highlighted the struggle that US producers are having to raise output.

"The 2-3% [estimate] is driven mainly on weight continuing to increase of what we think placements will be about flat to maybe up 1% or so in the back half of the year," Mr Smith said.

"I don't see a meaningful change in poultry production until probably the back half of our 2015," the group's fiscal year ending in September next year.

"There's going to be a very strong demand pull for chicken. And the industry's going to try to respond as much as it can."

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