Tyson slowing down poultry house construction plans in China
Demand for chicken in China has not rebounded as quickly as previously hoped, Tyson’s Donnie Smith says
Tyson Foods isn't backing off of its plans to grow its operations in China, but slow market conditions there have prompted the company to slow down those plans until the demand for chicken in China improves. Donnie Smith, CEO of Tyson Foods, explained that the poultry industry in China has not recovered from tough times as quickly as the company thought they would.
Speaking during a quarterly conference call with shareholders on January 31, Smith said he initially thought Tyson Foods China operations would break-even financially by the end of fiscal year 2013. However, Smith said he now knows it will take longer.
"There has been a change in the market dynamics in China over the past year, following widespread food safety concerns, avian influenza (AI) outbreaks and an economic slowdown. Previously, I told you that demand would return about three months after the initial AI problem was over, but I was wrong. Demand hasn't recovered, which has led to a substantial oversupply of chicken. And now there are new concerns of avian influenza. Because of these factors, we have decided to slow down on building more chicken farms beyond those currently planned for this fiscal year until market conditions improve," said Smith
However, Smith stressed that he is still committed to building Tyson Foods poultry houses in China.
"We are not changing our path, just our pace. We are not backing off of our long-term commitment to produce quality chicken with a controlled supply to China. We are simply slowing down until the supply-demand dynamics get back in balance in order to protect our margins. We'll move forward with our planning processes, and when the markets improve we'll be able to resume construction of company-owned chicken houses," said Smith.