Tyson Has a Beef With Industry's Doping Problem

No longer wanting to be the A-Rod of the cattle industry, meat processor Tyson Foods (NYSE: TSN  ) said beginning next month it will stop buying cattle that were fed the performance-enhancing drug Zilmax, which allows ranchers to feed their cows less but still puts on the pounds.

Unlike with the baseball doping scandal, however, Congress has not held hearings or been outraged -- outraged, I tell you! -- that ranchers have been drugging cattle before they're sent to market. Zilmax, which is produced by Merck's (NYSE: MRK  ) animal-health division, adds anywhere from 24 to 34 pounds to a cow just before it's slaughtered by causing bovine muscle fiber to expand by three microns. That might not sound like a lot, but when you're talking about millions of muscle fibers, it can boost a rancher's profit by $30 a head.

While the FDA says the steroid-like drug is safe for human consumption and Merck says it's safe for the cows, too, there's a growing body of evidence suggesting that might be, well, bull. Meat packer Cargill says Zilmax lowers the quality of the beef, making the meat tough and tasteless, while the world's largest beef producer, JBS (NASDAQOTH: JBSAY  ) , says it causes problems with a cow's ability to walk.

Merck counters that the drugs used in Zilmax have been researched for 30 years and have been used globally for 17 years, and are also used in Canada and Mexico. It's allowed ranchers to get twice as much meat from the same head of cattle as they did in 1958. 

However, a number of countries in the European Union, as well as China and Russia, have banned their use, and it's suspected the growing opposition to Zilmax and the similar drug ractopamine may have more to do with wanting to increase exports than any real opposition to its use. Smithfield Foods (UNKNOWN: SFD.DL2  ) , for example, stopped its use of ractopamine a week before its sale to a Chinese meat processor, and with both Tyson and Hormel Foods (NYSE: HRL  ) having said they're interested in expanding exports to the country as well, some analysts think it may just be a marketing ploy on Tyson's part.

Regardless of the rationale for the decisions being made, like the debate over genetically modified food, there is growing cognition by producers and consumers about what's being done to our food chain by corporate agriculture interests and the impact it's having on the health of animals, the health of our crops, and the health of those who eat them.

Even if it is a ploy by Tyson to gain export market share, as the beef processing leader with a 26% share of the market, it's raised the profile of the issue, and we may soon see more opposition to doping cattle. And that's something consumers and investors should have no beef with.

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  • Report this Comment On August 12, 2013, at 12:16 PM, EllenBrandtPhD wrote:

    Anyone interested in TSN should note that it is THIS quarter, not the last one, that tends to be the best quarter of the year in this group.

    So this is at least a TWO quarter story, and it explains why analysts are still so Bullish and raising Targets through the roof.

    It might be better if we had a committed Short contingent yelling BOO! BOO! BOO! But it is hard not to be Bullish in terms of the next few months.

    I think - truly - we can eke out a coupla more points to the upside, maybe even three. Let us see what we shall see.

  • Report this Comment On August 12, 2013, at 1:28 PM, lucasfarms wrote:

    You bandy about the word "rancher" rather loosely in the article, placing blame on producers. People who operate end-point feedlots and packing plants are typically not located on anything like a "ranch." From my point of view (I am a rancher), you evidence a severe lack of knowledge about the beef industry with your terminology -- bringing into question your conclusions -- and your unscientific connection between beta-agonists and baseball performance enhancers. Good headline, but does not shed any light on the issue. We don't use any growth enhancers where I live. But I'm a consumer, too. I want to know the real story, not alarmist hype!

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