Tyson Tumbles as China Tariffs Spark Pork Pileup Concerns

(Bloomberg) -- Shares of Tyson Foods Inc. are taking a hit as China’s new tariffs cause fears of a U.S. pork pileup.

China’s retaliatory measures against American imports took effect Monday, including a 25 percent tariff on pork. The duty comes just after government data showed that the American hog herd on March 1 reached a seasonal all-time high. The tax may cause U.S. meat supplies to “back up meaningfully” and cause pork prices to fall, dragging on chicken and beef, Tim Ramey, an analyst at Pivotal Research Group, said Monday in a report. He lowered his stock rating on Tyson to sell.

Tyson fell as much as 7.1 percent on Monday in New York and closed at $68.64, the largest drop since November 2016. The company declined to comment on the tariffs. June hog futures on the Chicago Mercantile Exchange tumbled by the 3-cent limit to close at 73.55 cents a pound. Neil Dierks, chief executive officer of the National Pork Producers Council, said the group is “disappointed” about the tariff and hopes it will be short-lived, according to an online statement.

Hogs Plunge as Huge Supply Signals ‘Mountain of Meat’

Combined with sales to Hong Kong, China was the second-largest destination for U.S. pork exports by volume last year, industry data show.

While China is a “volatile” buyer, the country is the largest market for pork byproducts and there are few alternative destinations, Jeremy Scott, an analyst at Mizuho Securities, said in a report. “Healthy export flows, particularly of offal product, is necessary to clear the supply ramp from the new pork packing capacity coming online this year,” he said.

Tyson’s shares are trading about 18 percent lower than the average Wall Street price target of $83.33.

--With assistance from Gilbert Xu (Bloomberg Global Data) and Kimberly Yuen

To contact the reporter on this story: Megan Durisin in Chicago at mdurisin1@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Millie Munshi, Steven Frank

©2018 Bloomberg L.P.