… experts say the
longer prognosis reveals Tyson Foods' cash window on pork may be closing …
Experts: Tyson May
Find Pork Profits Harder To Make
By Kim Souza
THE MORNING NEWS -
August 4, 2008
The meat giant's pork operating income for the past three
quarters totaled $193 million, up 7.5 percent from the year-ago period. After
three quarters of business in fiscal 2008, pork has been Tyson Foods' most
lucrative business segment, replenishing losses of $70 million in chicken and
$73 million in beef.
Pork comprised 19.6 percent of Tyson Foods' total sales
revenue and 100 percent of the company's operating income through the past
three quarters.
But experts say the longer prognosis reveals Tyson Foods'
cash window on pork may be closing as hog farmers ramp up sow liquidations amid
escalating losses resulting from higher feed costs.
Average pork margins for processors like Tyson Foods were
$13 per head in July, compared to $3.85 per head a year ago, according to Farha Aslam, analyst with
Stephens Inc.
At the same time, consumers have seen average pork prices
stabilize between $2.85 and $2.90 per pound, a bargain when compared to choice
beef retailing for $4.30 per pound, according to Aslam's
report.
But not everyone is making money on pork.
According to the National Pork Producers Council, swine
farmers have lost an average of $30 per hog this year because of higher grain
prices, which comprise about 70 percent of the total cost of raising a pig.
Prices for corn and soybean meal, key components in hog
feed, have risen roughly 75 percent in the past 12- to-18 months, squeezing the
profit margins for hog feeder operations and independent hog farmers, experts
said.
Charles Maxwell, who manages a swine operation for the
Though finished hog prices have increased from $55 to $75
per hundred weight in recent months, the difference between industry feed costs
and sales receipts is still showing red ink, which is forcing some liquidation
among independent farmers.
Swine producers of all sizes are facing tough economic times
and, just like dairy producers, have almost become extinct in the state of
Experts said outside of Tyson Foods, Cargill, Coastal Plains
and Wickman's commercial swine farms, just a handful
of other
"We have had about a dozen independent
Masters said the group were former contract growers for
Tyson Foods, which discontinued its contract business in 2002. He said the
farmers began selling to a hog feeder north of
On the national level, swine herd production is expected to
shrink as much as 10 percent in the next several months, according to the
National Pork Producers Council.
Fewer hogs going to slaughter should provide price support
for producers in the next five to six months, if grain costs don't continue to
rise, said Gene Martin, senior market analyst with the Arkansas Farm Bureau in
That means consumers will be paying more for pork chops and
baby-back ribs come spring, he said.
Martin said speculative investors in recent months bid up
grain prices, which cost independent hog producers millions of dollars.
During a recent earnings call Tyson Foods CEO Dick Bond told
investors that cattle and pork producers and processors have not been
successful at passing along grain costs to the consumer. He said tighter hog
supplies due to herd liquidation will likely be felt by early next summer
sending both wholesale and retail prices higher.
For now it's the strong export demand to
Fast Facts
Tyson Foods Pork Group
Tyson Foods' pork marketshare
ranks them No. 2 in the
The company owns a pork producing group with a herd of about
300,000 hogs, including 70,000 sows.
The pork group represents only 1 percent of Tyson Foods'
pork production. The company buys the majority of the finished hogs it
slaughters via fixed contract or spot market.
Source: Tyson Foods Inc.
nwaonline.net