Tyson Foods Inc. said quarterly profit was unchanged from a year ago, as soaring feed costs offset the higher beef, chicken and pork prices the largest U.S. meat producer received from its retail and restaurant customers.
While Tyson generated a record $8 billion in sales during the quarter, company executives indicated profit margins will remain under pressure in coming months amid high grain costs. They also expressed caution over the economy, saying consumers are being pinched by persistently high unemployment and gasoline near or above $4 a gallon.
As a result, some consumers are “trading down” at the grocery meat case, forgoing pricier beef and pork in favor of cheaper chicken, Tyson executives said.
“Demand has been sluggish, probably due to the bad weather experienced in much of the country,” Smith said during a May 9 conference call with analysts following the release of quarterly results. “The slow economic recovery is still a factor as well.”
Smith said recent Nielsen Co. research indicated consumers are likely to “remain conservative” and maintain belt-tightening behavior adopted in the early stages of the 2008-09 recession, “including eating out less, value-conscious shopping and increased use of coupons.”
Also, Tyson is seeing more chicken promotions at both retailer and foodservice as the summer grilling season approaches, Smith said. “Chicken is still a more affordable option for people trying to feed their families in tough economic times,” he said.
Retail beef and pork prices are “very strong,” he added. “Eventually, this should support chicken prices. Our chicken prices must increase to cover these unprecedented grain cost increases.”
Supermarket beef, chicken and pork prices have risen this year as meat processors passed along increased costs stemming from the corn market’s record rally.
Tyson’s beef prices rose 20 percent on average during the quarter ended April 2, while pork rose 18 percent, the company said in a May 9 statement: http://bit.ly/kadXh7. Tyson’s chicken prices climbed 3.7 percent.
According to U.S. Labor Department data, choice-grade, boneless sirloin steak averaged $6.46 a pound nationwide in March, up 15 percent from the same month in 2010 and the highest for any month since May 2005. By comparison, boneless chicken breasts averaged $3.22 a pound, down 1.2 percent from a year earlier.
Tyson expects to continue to face “challenging and volatile market conditions” through the rest of its fiscal 2011, Smith said in the May 9 statement. Tyson’s earnings for its fiscal 2011, which runs through September, are expected to be “comparable” to 2010, Smith said.