Tyson Foods shares drop the most in 17 months on China's retaliatory tariffs

  • Shares of the food company fell as much as 6.1 percent, the most in a single day since October 2016.
  • "We expect the Chinese tariff to cause meat supplies in the U.S. to back up meaningfully as the market has to be cleared, 'sell it or smell it,'" Pivotal analyst Timothy Ramey wrote.
Pigs eating
Simon Clay | Getty Images

Tyson Foods fell the most in roughly 17 months on Monday after China's retaliatory tariffs on American goods targeted U.S. agriculture and food producers.

Shares of the processed food company closed down 6.2 percent on the quarter's first trading day amid a broader market sell-off, falling the most in a single day since November 2016. The sell-off in Tyson shares on Monday adds to the company's nearly 15 percent decline since the year began.

"The impact will be broad-based and will signal the top in Tyson margins," Pivotal analyst Timothy Ramey predicted. "We expect the Chinese tariff to cause meat supplies in the U.S. to back up meaningfully as the market has to be cleared, 'sell it or smell it' — the loss of a meaningful export market means that product has to be sold elsewhere."

The Springdale, Arkansas company produces and packages chicken, beef, pork and prepared foods, making it a prime target of any agricultural tariffs.

Beijing's new tariffs on meat, fruit and other American products is in response to new U.S. taxes on Chinese goods, heightening fears of a potential trade war between the two economic powerhouses. China's latest move, announced by its finance ministry in a statement dated April 1, comes after President Donald Trump approved taxes on foreign steel and aluminum.

The tariffs will take aim at 128 kinds of U.S. products, identical to the proposed list released by the government on March 23. At that time, the Chinese government said the impact would have an import value of $3 billion.

"China is the second-largest export market for the U.S. pork producers accounting for over 20 percent of our exports, second only to Mexico and more important than Mexico in premium products," Ramey added. "Growing exports to China of both chicken and pork products have been the single largest driver of the long-term bull market in Tyson's margins. That likely changed today."