BSE restrictions drag down Tyson's performance

Related tags Cattle Us Bse

Higher prices and lower grain costs largely offset down volumes in
Tyson Foods' meat lines, but ongoing BSE restrictions have helped
drag down the company's bottom line.

The company said that it earned $76 million in the fiscal second quarter, down from $119 million a year ago. Sales however did manage to rise to $6.4 billion from $6.2 billion.

Indeed sales in all of its segments - beef, chicken, pork and prepared foods - were higher even as volumes slipped. The company said in its earnings report that it also benefited from a decrease in grain costs.

In beef, however, the company posted a $75 million increase in operating losses due to lower domestic cattle supplies and restrictions on imports of Canadian cattle due to ongoing concerns over BSE. In addition, live cattle costs were higher than the same period last year.

Tyson, along with many other North American meat packers, was disappointed when a judge temporarily blocked plans to reopen the border to young Canadian cattle in February.

This would have increased the supply of beef and opened However district judge Richard Cebull granted the request for a preliminary injunction brought by a ranchers group that argued the reopening would expose their cattle - and US consumers to mad-cow disease.

Agriculture Secretary Mike Johanns echoed meat packers' concerns when he said that he was "very disappointed"​ in the ruling. The USDA was keen to re-establish trade with Canada for live cattle under 30 months of age. The US border was closed to live Canadian cattle in May 2003 after a single cow with bovine spongiform encephalopathy was discovered in Alberta.

However the USDA is now confident in the safety of the North American beef supply. It says that the current ban on specified risk materials from the human food chain provides protection to public health, should another case of BSE ever be detected.

Measures to strengthen public health safeguards in the US include the longstanding ban on imports of live cattle, other ruminants, and most ruminant products from high-risk countries. In addition, non-ambulatory cattle have been banned from the human food chain and air-injection stunning of cattle has been made illegal.

And any animal presented for slaughter that has been sampled for BSE, will be held until the test results have been confirmed negative.

Despite the ongoing restrictions - and the closure of key markets such as Japan to US beef - Tyson is confident that increased demand for chicken and improved domestic cattle supplies will result in significant improvements in the second half of the fiscal year. The company expects to earn between $1.05 and $1.20 per share for the full fiscal year versus a current Street view of $1.05.

Related topics Processing & Packaging

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