Tyson Foods beats profit estimates as chicken demand rises

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Increased chicken demand offsets beef losses for meatpacker

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Tyson's net sales rise 5.1%, beating analyst estimates

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Beef unit reports $143 million loss amid soaring cattle costs

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By Tom Polansek and Angela Christy M

CHICAGO, Feb 2 (Reuters) - U.S. meatpacker Tyson Foods (TSN) reported higher-than-expected quarterly earnings on Monday as increased demand for its chicken products overshadowed hefty losses in ?its beef business. Beef prices set record highs as ranchers slashed the U.S. cattle herd to a 75-year low due to a persistent ?drought that burned up pastures and hiked feeding costs. Though demand remained largely resilient, high prices pushed some ?consumers to eat more lower-cost chicken. In January, U.S. consumer confidence slumped ?to the lowest level ?in more than 11-1/2 years amid mounting anxiety over high prices and a sluggish labor market. Demand for chicken should benefit as cattle ?supplies are expected to remain tight through 2027, Tyson CEO ?Donnie King told analysts on a call.

"Consumers increasingly opt for value-oriented protein choices," COO Devin Cole said on the call.

Shares rose after slipping earlier in the session.

BEEF ?PRICES SET RECORD IN DECEMBER U.S. President Donald Trump ?has faced ?pressure to address the issue of affordability and pledged to lower beef prices in October. Still, prices for steaks and hamburger meat have increased. Raymond James said in a note that it ?could be premature to expect that beef prices have peaked due to limited signs that ranchers were starting to rebuild the herd. Once that process begins, it typically tightens supplies and hikes prices further before production expands. Retail prices for ground beef in December were up 19% from a year earlier at a record $6.69 per pound, according to the Bureau of Labor Statistics. Meatpackers benefit from rising prices but have ?also paid ?more to buy cattle to slaughter. Tyson said its cattle costs climbed by $850 million in the quarter that ended on December 27 compared to a year earlier.

"We have the big challenge ?right now as it relates to beef," King said. "We're looking at that and looking for solutions beyond what we can control."

Tyson said in November that it was closing a major beef plant in Nebraska and reducing operations at a Texas facility.

BEEF SALES VOLUMES FALL, PRICES SOAR Tyson's quarterly net sales rose 5.1% to $14.31 billion, beating the average analyst estimate of $14.09 billion. Adjusted earnings per share of 97 cents topped expectations of 94 cents.

Chicken sales rose 3.7%, ?though the segment's adjusted operating income slipped to $459 million from $471 million a year earlier.

For beef, quarterly sales volumes fell 7.3% as prices soared 17.2%. The unit reported an adjusted operating loss of $143 million, compared with income of $6 million a year earlier.

(Reporting by ?Tom Polansek and Angela Christy M in Bengaluru; Editing by Maju Samuel, Sharon Singleton and Mark Porter)