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JBS profit at 4-year high on grass-fed beef; Tyson net-income rise expected

By Bloomberg News

This article was published October 1, 2012 at 9:13 a.m.

a-cowboy-gathers-nelore-cattle-at-the-zenith-iii-farm-near-alta-floresta-brazil-on-march-16-2007

A cowboy gathers Nelore cattle at the Zenith III farm near Alta Floresta, Brazil, on March 16, 2007

— JBS SA, the world’s largest beef producer, is set to post the highest quarterly profit since 2008 as Brazilian meatpackers are shielded from surging grain and cattle prices that eroded the margins of global peers.

Third-quarter net income will be $164 million, compared with a year-earlier loss of 67.5 million, according to the average of four analyst estimates compiled by Bloomberg. JBS’s 19 percent return in the past three months makes it the world’s third-best performing meatpacking stock, after Barretos, Brazil-based Minerva SA and Marfrig Alimentos SA, which gained 44 percent and 38 percent, respectively.

Global grain and cattle prices are soaring after the worst U.S. drought in 56 years. While U.S. ranchers rely on corn and other grains to feed livestock, Brazil’s herd is mostly grass-fed. Sao Paulo-based JBS also has been shielded from rising cattle costs after Brazilian prices on Aug. 14 fell to the cheapest relative to U.S. prices in five years.

Rising grain prices probably will drive farmers to increase production next year, averting food shortages, Greg Page, chairman and chief executive officer of Cargill Inc, said in a Sept. 24 interview. Cargill dominates the U.S. grain market along with Archer Daniels Midland Co. and Bunge Ltd.

Tyson Foods Inc., the largest U.S. meat processor, will report net income of $160 million for the fiscal quarter that ended Sunday, up from $97 million a year earlier, according to the average of seven analyst estimates compiled by Bloomberg.

Tyson shares have lost 11 percent in the past three months. The company cut its full-year sales and profit forecast amid rising feed costs, it said Aug. 6. Revenue will be $33 billion in the year through September, compared with a previous forecast of $34 billion, the Springdale-based company said.

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