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Ranchers.net

CHICAGO (Reuters) - Tyson Foods Inc. on Monday reported a loss that was worse than forecast and said the results for the year would miss expectations, sending its stock down as much as 9.5 percent as the recovery from an oversupply of meat is slower than expected.

Tyson has been hammered by a glut of poultry due, in part, to bird flu concerns overseas that left more leg meat in the U.S. market.

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The company's beef business was hurt in the quarter by lower beef prices as drought conditions forced ranchers to sell steers and heifers because there was no grass for grazing.

But analysts also said Tyson's business was on the road to recovery, though the timing could be hard to predict.

"These are complex markets, very global in nature," Tim Ramey, analyst at D.A. Davidson, said. "They can't really forecast price and demand with the precision that a toilet paper company could or a toothpaste company could."

Tyson, whose shares are down about 17 percent for the year, also said chicken prices should improve in August and September and the company's beef business should break even in the fourth quarter.

The Springdale, Arkansas-based company reported a loss of $52 million, or 15 cents per share, for the fiscal third quarter ended July 1, compared with a year-earlier profit of $131 million, or 36 cents per share.

Analysts, on average, forecast a loss of 4 cents, according to Reuters Estimates.

Sales fell 4.9 percent to $6.38 billion.

Tyson forecast a fiscal-year 2006 loss of 41 cents to 51 cents a share. Analysts on average forecast a loss of 4 cents a share, according to Reuters Estimates.

As recently as April, Tyson had forecast full-year results ranging from a profit of 10 cents a share to a loss of 25 cents a share.

The company earlier this month said it plans to cut about 420 jobs as part of a plan to reduce costs by $200 million.

PRODUCTION CUTS

Tyson's chicken sales fell 7.8 percent in the third quarter, due to lower prices. The unit posted an operating loss of $59 million, compared with a $198 million profit a year earlier, weighed down by higher energy and feed prices.

Tyson and other poultry producers are cutting production to help bring supply in line with demand. The company told analysts on Monday that it has cut production by a little more than 3 percent and plans further cuts of 2 percent to 3 percent by late fall.

Analyst Ramey said the poultry industry has been shaken by falling profits and may well stick to the cuts in production it has announced this year.

"If in fact the industry is cutting 3-4 percent, that should be enough," he said. "There is a time-honored tradition of cheating, versus your public statements.

Tyson's beef unit posted a loss of $10 million, versus a year-ago profit of $36 million, as sales fell 2.3 percent.

Some beef export markets that were closed due to concerns about mad cow disease in U.S. cattle are starting to reopen to Tyson and other U.S. exporters, though the process is slow.

Last week, Japan, traditionally the top market for U.S. beef, said it would allow some beef imports to resume after refusing imports for 30 of the past 31 months. But repeated obstacles have kept South Korea, formerly the No. 3 market, closed.

Tyson expects profit to be hit by higher interest expenses after credit rating agency Moody's Investor Service cut its debt to "junk" status a week ago. The company on Monday said it has reached agreements with lenders to amend its loan agreements.

Tyson shares were down 39 cents at $14.18 on Monday on the New York Stock Exchange; earlier in the session they dipped as low as $13.18.
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