Tyson eyes multibillion-dollar bet on Kazakh beef as route to China

Tyson eyes multibillion-dollar bet on Kazakh beef as route to China
Tyson Foods is in talks over a multibillion-dollar investment in Kazakhstan beef production as a back door into China, allowing the US meat company to dodge high tariffs on American agricultural goods. 

The US is the world’s largest beef producer, but sales to China have been disadvantaged since Beijing imposed a 25 per cent retaliatory tariff in July last year, bringing the total levy to 37 per cent. The value of US beef exports to China fell 17 per cent year on year in the first quarter. 

Three people with knowledge of the discussions said that Tyson was in negotiations to set up a beef processing plant, as part of the Kazakh government’s push to attract investment by selling itself as an agricultural powerhouse on China’s border. Chinese tariffs on Kazakh meat are 12 per cent. 

Tyson, the largest US meat packer, has discussed an initial investment of about $200m in the plant, one of the people said. It would form part of a potential total investment that could run into several billion dollars, with ambitions to scale up production to 5m tonnes of beef a year. The US is expected to produce 12.4m tonnes of beef this year versus 480,000 tonnes in Kazakhstan, according to US government data. 

Liz Croston, a Tyson spokeswoman, told the Financial Times that it was “not unusual for us to consider various international opportunities” as part of the company’s efforts to expand globally, adding: “We have visited Kazakhstan and have interest in the nation’s future food production efforts. However, we have not formalised plans for a project there.” 

The Arkansas-based company generated $4.8bn — or 12 per cent — of its sales last year from outside the US, and executives have prioritised expansion in international markets.

Tyson recently agreed a $340m deal to acquire chicken plants in Thailand, the Netherlands and the UK sold by BRF of Brazil. Stewart Glendinning, chief financial officer, told a conference last week that he expected 90 per cent of the company’s growth to come from outside the US in the next five years. 

China’s demand for foreign pork, beef, chicken and fish meat is forecast to shoot higher as African swine fever removes as many as 200m animals from its pig herd, the world’s largest. 

“We are seeing increased shipments not only from the US, but other parts of the world to fill that gap,” Noel White, Tyson’s chief executive, said at the same conference.

Any investment from Tyson would be a major boost for Kazakhstan’s efforts to upgrade its agriculture industry, which is large and well-located between major consumers China, India and Europe, but inefficient and underfunded.

The vast country is one of the world’s biggest wheat exporters but outdated technology and farming techniques mean yields are low. The average hectare of Kazakh livestock farmland yields just 0.5 animals, against as many as six in countries such as the US or Australia.

Kazakhstan has invested to improve the genetics of its cattle herd. Thousands of head of Angus and Hereford breeds were flown in on Boeing 747 aircraft earlier this decade from the US, Canada and Australia, a rancher familiar with the shipments said. 

Last year the country launched an initiative to double beef and lamb production within a decade, in collaboration with the US Department of Agriculture.

Source: ft.com
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