JOHANNESBURG, SOUTH AFRICA — www.RothmanResearch.com undertakes intensive analysis of the meat products industry and provides systematic research on Tyson Foods Inc. (NYSE: TSN) and Pilgrim's Pride Corporation (NYSE: PPC). Sign up today on www.rothmanresearch.com to get access to these free reports and more.
While the meat industry earnings have not returned to pre-crisis levels, 2010 is seeing an increase in most areas. With quarterly earnings reports being published in those past two months and August, investors will get a clearer picture of where the industry stands. Today, Tyson Foods Inc. will be posting its financial results amidst great expectations that the company will be delivering a quarterly profit after two years of hardship. Conversely, Pilgrim's Pride Corp., which posted earnings a couple of weeks back, reported a decline of 38% in profit as revenue shrank.
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U.S. poultry exports had a bad start to 2010 with Russia and China imposing a ban and import tariffs respectively. In opposition to a chlorine rinse used in U.S. poultry production, Russia banned all imports up until June when U.S. companies yielded to their demands and changed their processing treatment. However, with shipments cleared, export sales are expected to rise in the next quarter. China on the other hand is still imposing tariffs on U.S. poultry, which they have denounced as being sold at less than cost price.
Current pork inventories are low, and production in 2010 is expected to be around 3.8 percent lower than 2009. Low supply has led to an increase in price, with 3rd quarter prices being up to 49 percent higher than the same quarter last year.
Beef producers are enjoying higher export levels than this time last year but they are concerned about rising corn prices which are eating into their feeding margins. In response to the rising costs of corn, the entire meat industry has been lobbying against government support for ethanol as an alternative energy. They are calling for an end to tax subsidies and import restrictions.
Of concern to larger companies is the new government's shift in attitude towards supporting small scale farming and production. The USDA released a list of proposed rules aimed at making the industry a fairer environment, where smaller companies can better compete with current corporate giants who are dominating the industry.
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Source: Rothman Research