Meat inflation expected by Tyson's CEO

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The chief executive of Tyson Foods predicted "meat inflation" this year as prices will rise because of strong beef and pork demand amid the smallest cattle herds in the United States since 1958.

"I was a little surprised to see a 5.4 percent decline in replacement heifers," or those held back for breeding, said Donnie Smith, referring to the U.S. Department of Agriculture's herd inventory report of a week ago.

"More heifers are going to the slaughter market, and that will mean continued declines in the beef cattle population of 1 to 2 percent per year, which will cause inflating costs," he said.

Smith said the same expectation of rising prices applies to pork, whose producers have thinned their herds by about 2 percent in the past year.

Iowa is the nation's largest producer of hogs and fifth-largest cattle feeder. Hogs and cattle bring about $8 billion in cash to Iowa's economy annually.

Tyson is a major buyer of livestock for its pork slaughter and processing plants in Columbus Junction, Perry, Storm Lake and Waterloo. The Arkansas company also has a deli meats plant in Cherokee and a case-ready meats plant in Council Bluffs. The company also buys Iowa cattle for packinghouses at Denison and across the Missouri River from Sioux City in Dakota City, Neb.

Tyson's profits jumped 86 percent in the last quarter, the company said Friday. For the quarter ending Jan. 1, the company recorded profits of $298 million, compared with $160 million a year earlier.

Tyson's costs for feed increased by $500 million in 2010, Smith said, as corn prices jumped from $3.50 per bushel to more than $6 per bushel in the last six months of the year.

Corn continued its march through 30-month highs on Friday, rising by 16 cents per bushel in the last hour of trading on the Chicago Board of Trade to close at $6.78 for the March contract.

The markets reacted to a report by the U.S. Grains Council stating that China's corn supply is far below normal. The council predicted China will need to make substantial purchases of overseas grain.

Council Chairman Terry Vinduska said that on a visit to China "we learned the government normally keeps (corn) stocks at 30 percent but they are currently a little over 5 percent."

He said the Chinese grain needs may lead to imports of as much as 9 million metric tons, which would be the equivalent of about 350 million bushels of corn.

"Today's market illustrates how hungry the trade is to get some Chinese business," said analyst Arlan Suderman of Farm Futures Magazine. He noted that China's plans to buy Argentine corn may be curtailed due to an expected 5 to 6 percent shortfall in that country's crop.

While China is a major buyer of soybeans - it accounts for 60 percent of U.S. soybean exports - it has not been a major buyer of U.S. corn for more than a decade.

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