China's pig supply has been depleted by 19 percent as a result of the spread of African swine fever. This gives U.S.-based Tyson Foods, Inc. (NYSE: TSN) an opportunity to increase sales to China as consumers shift consumption to chicken and beef, according to Credit Suisse.
Tyson is the largest U.S.-based protein producer and is positioned to take advantage of the disruption in the global meat market, Moskow said in the Tuesday upgrade note. (See his track record here.)
The company exports $1 billion worth of chicken, with the majority being leg quarters, the analyst said. If leg quarter prices move higher by 30 percent and hit the peak levels seen in 2014, Tyson would see an extra $300 million in profits, all else remaining equal, he said.
Despite the ongoing Sino-American trade war, U.S. exports of pork products to China increased by 200 percent in volume from the start of 2019 through May 2, Moskow said. An uptick in pork exports to China to make up for the country's lost supply could increase the value of commodity pork prices, he said.
Chinese consumers typically crave parts of the pork that are unwanted in Western markets, such as feet, which could help lift margins even further, according to Credit Suisse.
Tyson Foods shares were trading higher by 2.24 percent at $81.35 at the time of publication Tuesday.
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