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US beef packers in clover until 2020, says Tyson Foods

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Tyson Foods forecast strong conditions for US beef-packers for at least the next three years, supported by a boost to cattle supplies, at a time when export growth is supporting demand.

Thomas Hayes, the chief executive of Tyson Foods, which is the biggest US meat processor, said that the US beef industry was "at the front end of a multi-year expansion" in cattle supplies, from the multi-decade low hit three years ago.

Such an increase in supplies would be "great for Tyson", besides other meatpackers, in depressing wholesale beef costs.

Indeed, with "ample supplies of cattle, we see very good conditions for our beef business as far out as 2020", Mr Hayes said.

"Absent a shock to the system such as a drought or an import ban, our beef business is well-positioned for profitable, long-term growth."

Exports jump

The rebuild in the US cattle herd - which official data showed at 103m head as of the start of last month, a nine-year high – is co-inciding with expansion in US beef exports, which has helped support values of the protein.

Indeed, fata on Monday showed hitting 109,554 tonnes in June, an 11% rise year on year, and a six-year high for the month.

"Sharply higher US beef prices in May and June have done little so far to slow down the pace of US exports," said livestock analysts at New Hampshire-based Steiner Consulting, flagging the boosts to US trade from a weaker dollar and a squeeze on supplies from Australia, which is undergoing its own herd rebuild.

"The benefit for US beef at this point is that Australia supply availability is significantly lower than a couple of years ago and Japan still does not source beef from South American sources," Steiner Consulting said.

The group forecast July data showing a 6% rise in US beef exports year on year, with the potential for this month to seen a 10% increase.

China boost

Indeed, Mr Hayes flagged the potential for further support to US beef exports from the reopening of shipments to China for the first time since a ban was imposed in 2003, following a case of BSE in Washington state.

"The big news in the beef industry this summer was that China reopened to US beef imports," he told investors.

"While shipments at this point are very small, we're optimistic.

"Chinese consumers prefer high-value cuts, and we think they'll appreciate the superior quality of US beef."

Heifer caution

He also forecast a short-term boost to Tyson's beef margins from an improvement in northern US margins, which have been relatively low compared with those in the south.

In the three months to the start of July, "cattle in the north, where we compete, we were higher-priced last quarter.

"That's just the fact of the matter. But going forward, we see that supply is growing in our regions," with "high" placements of cattle for fattening on feedlots.

He also acknowledged, however, lower rates of heifer retention, as unveiled by the official data as of July, 1 as "something that is certainly on our minds".

Some observers have flagged the downturn in the numbers of heifers that cow-calf operators are keeping, while the proportion going to slaughter appears to have risen, as evidence of a weaker pace of herd expansion ahead.

By Mike Verdin

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