Articles in this document:
·
Tyson’s
Chicken Line Lags
·
Biofuels, Poultry
Firms at Odds / Pinched
·
The corn
conundrum: Which should come first, the chicken or the Chevy?
Tyson’s Chicken Line
Lags
By Kim Souza
The Morning News -
July 29, 2008
The world’s largest meat company reported its third-quarter net income tumbled more than
90 percent in the year-over-year period, due primarily to
rising grain costs. Tyson Foods also had two charges in the quarter totaling
$13 million in operating income losses. Recent flooding in
Tyson Foods reported net income of $9 million or 3 cents per share earned in the quarter, compared with $111 million or 31 cents per share a year ago.
The third-quarter results disappointed Wall Street analysts, who had predicted an average 12-cent per share return, sending the company’s stock price down 7 percent in heavy trading.
Shares of Tyson Foods (NYSE:TSN) closed Monday at $15.09, down $1.14.
Analysts agree meatpacker stocks are not for the faint of heart.
Morningstar analyst Ann Gilpin recently raised her uncertainty rating on Tyson Foods and other poultry companies, citing more downside potential in share prices. She rates the stock a hold with a fair market value of $14.
Tyson Foods CEO Dick Bond told investors during a Monday morning conference call that the meat giant would see deeper chicken losses in the fourth quarter as it expects to absorb $200 million in added grain costs. He said further chicken losses will be offset by higher beef and pork profits in the fiscal fourth quarter ending Sept. 30.
In the recent quarter, Tyson Foods reported a $44 million loss in its chicken operating income, compared to $95 million it earned a year earlier. Chicken sales totaled $2.25 billion in the quarter, up 9 percent from $2.06 billion a year ago. The uptick in sales related to 7 percent higher pricing and 2 percent in added volume.
Sagging prices also hurt chicken segment profits. Average wholesale boneless breast prices averaged between $1.30 and $1.40 per pound in the quarter, according to U.S. Department of Agriculture.
Industry analysts estimate boneless breast pricing would need to be between $1.90 to $2 per pound before chicken processors could return to profitability.
“While chicken continues to be challenging, we believe in our long term strategies and our diversified business model,” Bond said during the call.
Earlier this year, the company announced plans to spend $130 million in 2008 capital, employing cost saving measures and increasing operating efficiencies in its chicken segment.
Jonathan Feeney, analyst with Wachovia, asked Bond if now is a good time to be spending, when the company could bank its cash flow as a buffer against further losses in the chicken segment.
Bond said Tyson Foods will reap about $250 million in added operating revenue in fiscal 2009 from the $130 million spent this year.
“I believe our long-term strategies will increase shareholder value in due time,” Bond said.
The beef and pork segments are profitable today in part because of similar efficiencies made in those segments in recent years, he said.
A bright spot in the quarter was Tyson’s beef segment, reporting $3 million in beef operating income. Bond told investors the beef results were actually better, but a $75 million mark-to-market accounting procedure relating to the company’s forward cattle futures’ contracts disguised the results.
Tim Ramey, analyst with D.A. Davidson & Co., estimates the $75 million accounting procedure to be worth roughly 14 cents per share unrealized in the quarter.
Bond said the $75 million charge is a paper loss and will be recovered in the fourth quarter when the company takes possession of the cattle for slaughter. He said the market conditions are ripe for a “blockbuster fourth quarter in beef.”
In the recent quarter, Tyson Foods entered a contract to sell its Canadian beef facility to Canada-based X.L. Foods Inc. The sale will result in approximately $200 million in added income during the fourth quarter. Another $20 million is expected in fiscal 2009, and $49 million will be paid out over the two next years, the company said. Tyson Foods said it will also receive $30 million in preferred stock of X.L. Foods.
Bond said beef profits are expected to improve in the fiscal fourth quarter as South Korean exports have resumed this week. He said that demand is good for orders out 30 to 60 days.
Tyson Foods’ pork operating profits were $54 million, up 45
percent from $37 million a year ago. The segment outlook is positive, according
to Bond, who said exports to
The company’s prepared foods segment reported operating income of $6 million, down 76 percent from $26 million in the year-ago period. These results included a $7 million charge from flooding damage and higher costs of commodity prices.
swtimes.com
Biofuels, Poultry Firms at Odds / Pinched
The
31 July 2008
via RedOrbit
Soaring corn and soybean feed costs are squeezing some of
the big poultry companies that employ thousands of farmers and workers in
"This is probably the worst I've seen it ever,"
said Gary Lohr, who at 64 has been growing chickens
on Valley Pike Farm in
The pinch has led the meat industry to urge Congress to help lessen the demand for the crops by easing a renewable fuel standard passed by congressional Democrats and signed by President Bush late last year. The legislation mandates that 15 billion gallons of corn- based ethanol, or about 10 percent of motor fuel, be used by 2015.
Texas Gov. Rick Perry, a Republican, has filed a petition
with the Environmental Protection Agency to cut the requirement in half, and
On the other side are the renewable fuels lobby and corn farmers, who say that gasoline prices are the biggest factor in increasing food costs and that easing the mandate would exacerbate those costs for all Americans. A decision on the governor's petition is expected by the agency in August.
The outcome weighs heavily here. Towering above the rail
tracks that traverse
Every day cargo trains bring tons of the
Pilgrim's posted a $111.5 million loss in the first quarter of the year, attributing the decline largely to higher feed costs and an inability to push up prices because of an oversupply of chickens. The company's stock has lost 67 percent of its value since August. In April, Pilgrim's said it would reduce production by 5 percent to decrease the bird supply and pass on costs to consumers.
As of June, meats such as beef and pork had risen 1 percent compared with the same month last year. The price for poultry rose 2.8 percent in the same span.
When it can, Pilgrim's is also shortening contracts with grocers, restaurants and others from a year to 90 days, so that it can respond faster to rising prices in the months to come, said Ray Atkinson, a spokesman.
Tyson Foods, which has scaled back operations in recent years, was not planning additional cuts, though it is raising prices, said Gary Mickelson, a company spokesman.
Privately held Perdue, based in
The board of directors of Hinton's turkey cooperative announced a 25 percent production cut July 10, said James Mason, the president and general manager of the cooperative.
Poultry companies in Shenandoah supported about 900 farmers and employed more than 5,000 workers in 2007, according to the Virginia Poultry Federation, a trade association.
On Delmarva, poultry operations supported about 1,900 farmers and nearly 15,000 workers last year, according to the Delmarva Poultry Industry.
Originally published by LAZO; The Washington Post.
Source:
redorbit.com
The corn conundrum:
Which should come first, the chicken or the Chevy?
by Barbara Murray, July 30th, 2008,
6:00 am
Bizmology
Native North Americans believed in the Corn Mother (the
first woman to bear offspring, a kind of Eve).
After the white man took over and tamed North America, corn became the
Now corn is a high-priced double whammy. At least it appears that way to the average
American consumer progressing through an average weekend.
First, on the average American’s to-do list for the weekend:
gas up the car. We all know the story on
that. Suffice it to say the price of gas is out of sight. (Hummers, and even
your run-of-the-mill SUVs are the dinosaurs of the auto industry — big galoots
doomed to extinction but that’s another blog.)
Then on to filling the fridge for the
week. A fryer from the
supermarket, a gallon of milk from the convenience store – it doesn’t matter
where you go. It’s costing more. And if
our average American decides to see a movie – alas, even the popcorn at the
theatre, never a bargain in the best of times, costs more.
What does corn have to do with all this? Lots.
You see, in December 2007 the federal government passed an energy bill
mandating that ever larger amounts of ethanol be used to run our vehicles. The
bill was passed with seemingly good intentions (if not outcome). It was meant
to reduce the
But our lawmakers forgot to take into account that the
product of choice for making ethanol in the
Corn farmers supported the bill of course, but hey, here was
a chance to make some extra income. The law awarded farmers money for every
bushel of corn that was used for ethanol production. Ethanol manufacturers
(everyone from agricultural giant, Archer Daniels Midland – the #1 ethanol
producer in the world — to small newly formed companies created to take
advantage of the government’s largesse) became preferred corn farmers’
customers, at the expense of long-time corn users/customers such as dairy and
poultry farmers, beef ranchers who use corn for animal feed, and food and
food-ingredient manufacturers who use corn for people feed.
(Big oil companies like Exxon are trying to fight back the
ethanol scourge, no matter what it’s made from, but they seem to have lost their
influence in this debate.)
The double whammy (a whammy we’ve smacked our own selves
over the head with) is this: We use corn
to make foods we eat, we use corn to fill the fuel
tanks of our cars and trucks. Food vs. fuel.
It’s not nice to try to fool Mother Corn. She’s known for
millennia what corn is for. It’s for sustenance. It’s for eating. It is her gift to us, a gift
of food — for human, not transportation, systems.
bizmology.com