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Company: Tyson Foods (TSN)
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82%
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23 votes

  Tyson will drive Pilgrim's Pride out of business, rendering it unstoppable

Although Tyson is currently making huge losses in its chicken operating segment, it is still faring better than Pilgrim's Pride, the market leader in chicken processing. Tyson is committed to maintaining current chicken production levels even though it means lower prices, because doing so will cause Pilgrim's Pride irreversible harm. Whereas Tyson can survive these losses because of the strength of its other operating segments, Pilgrim's Pride produces only chicken, so consistent losses could force it into bankruptcy and allow Tyson to gain market share.

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100%
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1 votes

  New and huge market is being created in China - long term investment

To start with, it is important to imagine and have a clear picture of the dimensions of China’s growth and vastness in every economic and social aspect. For avoiding making it too long to read I will enhance on three indicators I consider the most significant. On the one hand, I want to focus on the projected China’s economic and population growth:

As we can see in the projections, China will continue to grow at a high and sustained pace (year GDP growth of 10%) and its population will start growing at a higher rate than it did in this decade. What is important about this data is that as population continues growing the country will continue to need huge supply of food from other countries. If population reaches 2025 estimates (260 million more) the country will need to increase its food demand 21%1. The economic growth shown in the graph will help China’s wealth for obtaining the food they need, by producing more efficiently and increasing imports from other countries. For making this information relevant and related to the meat market, is important to enhance that China’s population way of living are starting to change. First of all, because they have higher incomes (a new middle class is starting to appear), which allows them to afford more expensive things, as meat. Second, they are aware that meat is one of the best foods for making their children grow stronger and healthier. Third, many of them are starting to like eating meat.

With this data it stands to reason that in the near future, there will be an important expansion in the meat market, lead mainly by China, which will benefit the smartest countries. Related to this, one of the countries which is trying to increase its market share is United States. Forecasts from the U.S Meat Export Federation shows that in 2010 there will be a jump in beef exports to China, reaching 60,000 metric tons per year.

I believe it is clear why I am optimistic in investing somewhere in the meat market. I doubt wether it is the right time to make the decision or not, although it depends where are you planning to invest. Since the possibilities vary from investing in a farm with the purpose of breeding the cattle to buying some shares from an ETF that tracks livestock (AIGL, COW). It all depends in the risks the investor is willing to take. Taking the first option requires living in a country where you can breed good quality cattle, having a year without any climate effect (flood or drought) among other external factor that increase business risk. The second option will give smaller returns but, at least, allows everyone to take a share in this growing market. As I mentioned before, the opportunity exists in every part of the supply chain: The producers, who breed the cattle till they sell it, the firms responsible of carrying the cattle to another country (China could ask for livestock instead of processed meat), buying shares from big cattle producers (Tyson Foods - TSN, Sanderson Farms - SAFM), or from ETFs related to the business. It all depends on the investor.

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0%
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0 votes

  Chicken Market Recovery Will Catapult Tyson Earnings

Tyson responded to the weak demand and overproduction of chicken by cutting production late in the year. This strategy seems to be paying off as chicken has rebounded as a favored tradedown from beef as the recession takes its toll on consumers pocket books. Chicken sales have increased, while costs have decreased as the main cost of raising chicken, corn for feed, has fallen from record highs. Higher revenues and lower costs should ultimately benefit bottom line earnings.

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0 votes

  Tyson is the number one U.S. Beef processor

Domestically, Tyson leads beef processing and is a close second in chicken and pork processing.

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