Corn prices cause concern
Staff & Wire Reports
Tuesday, November 14, 2006
Tyson Foods Inc., the world’s largest meat processor, warned Monday that rising corn prices could mean U.S. consumers will have to pay more for chicken, beef and pork next year as it ended its fiscal year with a third straight quarterly loss.
The Springdale, Ark.-based company forecast a return to profitability in the new fiscal year, which started Oct. 1, as it gets a grip on costs and focuses on more efficient operations. Its shares rose 4 percent on Monday.
Eight senior executives of the company made presentations to analysts and investors at a special luncheon in New York City. The event was webcast and followed the company’s quarterly earnings call.
They told their audience of efforts they are making to generate additional revenue, including new joint ventures in South America and China, more-rapid product development, and creation of a new renewable energy division.
In an earlier statement, Richard L. Bond, president and chief executive officer, said the price of corn, which is used as animal feed, is going up because of demand from ethanol plants that are springing up to provide alternative fuel sources to oil.
Corn prices recently reached 10-year highs.
Bond said meat producers, processors and retailers will have to pass the higher grain price on to consumers because they cannot absorb it in their profit margins.
“This is an opportunity for analysts and investors who follow our stock to meet key members of our management team and learn more about the steps we’re taking to transform Tyson into an even more competitive, successful company,” Bond said.
A team of Tyson staff is exploring ways to turn the company’s vast supply of animal fats into commercially attractive biofuels under a new business unit named Tyson Renewable Energy. The new unit is also examining the potential use of poultry litter to generate energy and other products.
The new research and development complex will open early in 2007 in Springdale, Ark. It will include 19 research kitchens as well as a pilot plant that will be inspected by the U.S. Department of Agriculture. Wendy Davidson of Tyson Food Service told the group that the new project “will quite simply be the best food R&D facility in the world.”
Tyson International representative Rick Greubel discussed the projected increase in meat consumption worldwide over the next 25 years, and talked of plans to continue exporting meat, as well as establishing additional operations in other countries.