Tyson reports “misappropriation” of funds be beef supplier
- On Monday, Tyson Foods filed corrected financial results in its beef segment with the Securities and Exchange Commission (SEC) for fiscal years 2017 through 2020.
- The report filed to the SEC states that Tyson is reporting “misappropriation of company funds” by one of its beef suppliers.
- With help from outside advisors, an internal review of the supplier’s accounts is taking place.
- So far, that report has discovered that the supplier made misrepresentations concerning the number of cattle the supplier purchased on behalf of the company’s beef segment.
- In the report filed with the SEC, Tyson claimed that its live cattle inventory for the fiscal year 2020 was overstated by $285 million.
- The cumulative four-year inventory was overstated by $645 million.
- The cattle supplier who made these mistakes represents about 2 percent of the cattle supplied to Tyson between the years of 2017 and 2020.
- Despite these losses, they do not have a material impact on Tyson’s financial results for 2017-2020.
- Through its investigation of the situation, Tyson found no evidence that the company benefitted from the supplier’s unlawful conduct or that anyone at the company tried to alter financial statements to hide the transactions resulting from the supplier’s unlawful acts.
- Even though Tyson has corrected multiple financial statements, the company’s general trends in growth and operating profit metrics will remain the same, operating cash flow will be mostly unaffected, liquidity won’t change and the company will remain in compliance with all debt agreements.
- Tyson plans to pursue restitution for losses to date.
CattleFax; Building from the Covid-19 lows.
- Both 2019 and 2020 saw U.S. beef exports decline.
- Larger global beef production hurt 2019 sales and 2020 was impacted by Covid-19 supply disruptions limiting export sales.
- According to CattleFax, beef exports could grow by 5 percent or more in 2021, and then continue to see moderate growth over the next several years.
- Japan and South Korea are the two largest global markets for U.S. beef, and both are expected to grow in 2021.
- S. trade agreements with these countries are allowing U.S. beef exports to be more price competitive.
- Additionally, Australian beef production is experiencing a 14 percent decline from the high in 2019, which has created new opportunities for U.S. beef producers.
- Since the Phase One trade agreement, U.S., beef exports to the Greater China region (China, Hong Kong, Taiwan, and Vietnam) have increased each month.
- In 2019, U.S. beef shipments averaged 3 million pounds per month to this region. Just in October 2020, China received 20 million lbs. of U.S. beef.
- Exports to Mexico have been a bit lackluster since Mexico cattle producers are expanding their beef cowherds, and growing beef production may constrain U.S. beef demand.
- Canada is expected to purchase around 300 million lbs. of U.S. beef in 2021, but growth potential will remain limited due to Canadian cattle slaughter being robust.
- 2020 beef imports were impacted by record-high domestic beef prices in the spring and summer, which led to a 10 percent increase in imports.
- Imports in 2021 are expected to decline 5 percent.
Boxed beef prices
- Choice boxed beef: $210.67 (-0.25)
- Select boxed beef: $199.59 (+2.33)