May 21, 2014 / 1:47 PM / 6 years ago

Tyson buying heavy hogs, will lower production in wake of virus

NEW YORK (Reuters) - Tyson Foods Inc (TSN.N), the United States’ largest meat processor, is buying heavier hogs and expects to scale down production more than usual this summer, as it copes with a drop in pig supplies due to a deadly virus.

“We’re seeing very heavy hogs come to market,” Chief Executive Donnie Smith told Reuters on the sidelines of the BMO Farm to Markets conference in New York.

Porcine Epidemic Diarrhea virus (PEDv) has killed about 7 million piglets since it was detected a year ago in the U.S., where the outbreak has been most severe.

The virus causes diarrhea, vomiting and severe dehydration, and is transmitted orally and through pig feces. The virus kills 80 to 100 percent of piglets that contract it.

The drop in supply drove Chicago hog futures to a record high on April 2 of nearly $129 per cwt, although prices have since pulled back. The U.S. is the world’s largest pork exporter.

To offset some of the reduced number of pigs, farmers are bulking up pigs to all-time heavy weights. Tyson is accepting for slaughter hogs that tip the scales around 295 lbs (134 kg), 10 to 15 percent heavier than usual, said Steve Stouffer, president of fresh meats at Tyson.

The bigger pigs have not caused problems in plants that are used to handling smaller hogs, and farmers are likely to produce them at that size until it is no longer economical to do so, Stouffer said.

Smith said Tyson will reduce hog slaughter and pork production levels more than usual during the July through September period, when pig supplies are expected to be lowest. Summer is typically a slower production period.

“We’ve run reduced hours,” Smith said. “We’ll manage our hours to the supply.”

The company has no specific plan for how it will lower production and is managing supplies from week to week, Stouffer said. If summer is cooler and wetter than usual, fewer hogs are likely to die from heat, which could offset some of the lower supplies, he said.

Tyson is also trying to offset the decrease in supply by communicating closely with customers, so meat sellers are not promoting back ribs for example, unless they have made provisions for adequate supplies, Smith said.

Worries about PEDv led the European Commission on May 6 to introduce new rules for imported pig blood products as a precaution against spreading the virus.

But Smith said he is more concerned about a trade backlash against U.S. pork due to another issue, its country of origin food labeling rule.

The World Trade Organization said in 2012 that the U.S. rule that certain cuts of meat must display the country of origin was not in compliance with WTO obligations.

“We need to either dramatically rewrite that rule or eliminate it,” Smith said. “I’m afraid what could happen is trade retaliation from our good trading partners in Canada and Mexico, and frankly I wouldn’t blame them.”

Canada has already named a series of U.S. products, including pork, for possible retaliation.

Reporting by Rod Nickel in New York; Editing by Franklin Paul and Marguerita Choy

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