Tyson Foods Inc. is reportedly in talks to build a beef processing plant in Kazakhstan as a back door for deals with China.
A multibillion-dollar investment in Kazakhstan beef production would spur the economy and allow Tyson to dodge China's steep tariffs on imported U.S. goods, the Financial Times first reported.
U.S. beef sales to China have stalled since China imposed a 25% retaliatory tariff last summer, bringing the total levy to 37%.
The Springdale-based company began negotiations as part of the Kazakh government's efforts to sell itself as an agricultural powerhouse on China's border, three sources familiar with the matter told the Times.
China is currently reeling from African swine fever, a hog disease that has wiped out millions of tons of China's pork supply. It is not harmful to humans. To fill the gap, Tyson Foods and its competitors are increasing production. But tariffs on billions of dollars of U.S. agricultural goods such as beef and pork have muted market penetration.
Officials with Tyson did not deny the Kazakhstan report.
"We've visited Kazakhstan and have interest in the nation's future food production efforts, however, we have not formalized plans for a project there," Liz Croston, a spokesman with Tyson Fresh Meats, said in an email Thursday.
"It's not unusual for us to consider various international opportunities," she said.
The company recently acquired a major McDonald's chicken supplier, Keystone Foods, which has operations along Asia's Pacific rim, and has a pending acquisition of a few Brazilian-owned poultry plants in Thailand and Europe.
Tyson expects 90% of its growth to come from outside the U.S. in the next five years, Stewart Glendinning, Tyson's vice president and chief financial officer, said at a conference in New York last week.
At the event, Tyson's President and Chief Executive Officer Noel White addressed the pork supply deficit in China and said that in order to close the pork gap, China will have to import all types of animal protein, including fish, chicken and beef.
Having access to export markets is key for that. Given all the trade tension between the U.S. and China, companies are doing what they can to keep commerce with the global powerhouses afloat.
"It would certainly make sense that [Tyson] would want an alternative place in order to continue doing business with China, being right next door with Kazakhstan, the timing makes sense," said Eric Wiebelhaus-Brahm, a professor of Middle Eastern studies at the University of Arkansas, Little Rock.
Kazakhstan, the second-largest country of the former Soviet Union, ranks 70th in the world by per capita gross domestic product ($8,762), World Bank data show. The nation also borders Russia.
Oil, natural gas and mineral extractions form the backbone of Kazakhstan's economy, but, in recent years, leaders have pushed to diversify and grow other industries, said Wiebelhaus-Brahm.
"Kazakhstan sticks out as a place where agriculture and cattle are a significant part of the economy," he said.
Agriculture makes up 6% of Kazakhstan's economic production, according to the International Trade Administration. It is also one of the top 10 grain exporters in the world and home to farmers that raise cattle for dairy, meat and other goods.
Investors do, however, have their reservations. Despite efforts from leaders to draw industries to Kazakhstan, concerns of corruption, bureaucracy and arbitrary law enforcement remain, Wiebelhaus-Brahm said, citing the World Factbook.
"But a company like Tyson will have done its due diligence before investing anywhere," he said. "If they decide to go anywhere."
Business on 05/25/2019