USA - Tyson May Buy Chinese Poultry Producer on Higher Meat Prices

Tyson Foods Inc. said it may buy a Chinese poultry company, part of a plan by the world's largest meat processor to meet rising consumer demand for good-quality food and capitalize on higher meat prices in the Asian nation.

Tyson aims to start producing and selling poultry in China in the next year, adding to shipments from the U.S., said James Rice, Greater China country manager of the Springdale, Arkansas- based company.

"We're either going to partner with a leading poultry company so we already have a head start, or we'll look for a green-field operation where we can start with world-class best practices," Rice said in a July 27 interview in Shanghai. "Chinese consumers want trustworthy brands and they want safe food. That's exactly what we do."

China, the sixth-largest buyer of U.S. pork and the world's biggest consumer of the meat, is importing more food from producers including Tyson, after an outbreak of hog flu reduced supplies. Rising incomes are spurring meat consumption, while increasing awareness of food safety pushes consumers to buy from retailers that enforce their own safety standards.

China's growing middle class will increase food expenditures to $650 million from the current $150 million in the next decade, an annual growth rate of about 17 percent, consulting firm A.T. Kearney estimates. Rice estimates China's per capita annual protein consumption at 10 kilograms (22 pounds), compared with 38 kilograms in Hong Kong and 53 kilograms in the U.S.

Chicken Production

China will produce about 10.5 million metric tons of chicken in 2007 and will import 430,000 metric tons, according to estimates by the U.S. Department of Agriculture. Tyson supplies 18 percent of China's chicken imports, including selling chicken feet which U.S. consumers don't eat, Rice said.

"Americans eat chicken breasts, and during football season they eat the wings, and the rest of the year we have to get rid of the rest of the bird,'' he said. "The wings go to Africa, the legs go to Russia and the feet come to China -- it's the ultimate global product.''

The Chinese government in June banned imports from two Tyson factories in the U.S. because of salmonella found in shipments of frozen chicken and pork. The suspension hasn't affected Tyson imports to China because the company shifted its production for China to other plants, which number 167 in the U.S., Rice said earlier this month.

Tyson's sales in China may grow as a recent pork price rise makes imports competitive, and boosts costs of other types of meat.

Importing Pork

China may buy an additional 100,000 tons of pork in world markets after the country's hog population was culled by the porcine respiratory and reproductive syndrome, known locally as the Blue Ear disease. About 89,000 hogs have been killed by the virus or have been slaughtered to contain the disease, Xinhua News Agency reported yesterday.

Last year, the U.S. sent 164 million pounds of pork to China and Hong Kong, according to the USDA. In the first five months of 2007, exports to China rose 45 percent to 96.36 million pounds, the department said.

Until recently, pork prices in China were too low to make importing the meat profitable, Rice said. The price of pork surged 75 percent in June from a year earlier and the meat will remain in shortage "for a fairly long time,'' the National Development and Reform Commission said this month. The Chinese government may encourage more imports to slow inflation.

"Pork prices are not going to come down -- for the foreseeable future the price will be increasing,'' said Rice, who expects demand to outstrip supply for another two years as the industry recovers from disease outbreaks. "Poultry comes with that because consumers, if they want protein, can choose within pork, beef or chicken. The protein demand has driven up prices and the lack of pork has driven up prices.''