Strategic changes over the past two years have significantly improved Tyson Foods' cost structure, the company reports. Tyson also continues to make progress in its efforts to convert byproducts into fuel and other higher margin items. 

In the past two years Tyson has reduced its finished cattle capacity by nearly 8,000 head per day by suspending slaughter operations at three locations in areas with low cattle availability. This includes closing plants in Boise, Idaho, and West Point, Neb., and restructuring operations at Emporia, Kan.

“Reducing our beef production capacity and focusing on regions with more available cattle have made our operations more efficient,” says Noel White, a senior vice president for Tyson Fresh Meats. “We’ve improved the balance between our capacity and available cattle. We've also succeeded in making other operational improvements in both our beef and pork plants.”

Tyson’s pork business has been bolstered by strong exports. The weak U.S. dollar and live-hog price, as well production costs compared to other countries have worked in the U.S. pork industry's favor. USDA projects steady growth for U.S. pork exports for the next 10 years.

Tyson’s efforts to revolutionize the conversion of raw materials and byproducts into high-margin initiatives currently involve four growth platforms: renewable energy, pet products, bio-tech and nutraceuticals. 

Jeff Webster, senior vice president of Tyson’s Renewable Products Division, offers an update on the company’s strategic alliance with ConocoPhillips to convert fat into renewable diesel fuel. The two companies experienced a successful start-up in December 2007 and are now producing 300 to 500 barrels of renewable diesel per day. 

“The progress we've made in producing renewable diesel helps animal agriculture and does not directly impact the food chain,” Webster notes. “We hope future decisions by Congress regarding investment incentives do not impede our company's ability to make these contributions." 

Webster also notes Tyson's participation in Dynamic Fuels, a joint venture between Syntroleum Corp. and Tyson, to convert low-grade, inedible fats and greases into renewable synthetic diesel, jet and military fuel. Dynamic Fuels has secured preliminary approval for $100 million in tax exempt Gulf Opportunity Zone Bonds to fund the building of the company’s first renewable synthetic fuels facility in Geismar, La. 

Equipment has been ordered, process engineering for the project is completed and final cost estimates are expected this month. Construction is expected to begin this fall, with start-up planned for the first quarter of 2010. Once in operation, the plant is expected to produce about 75 million gallons of renewable synthetic fuel annually.

Tyson also has partnerships with other companies to produce such items as pet food products, super absorbent materials, collagen-based products and protein supplements. For example, earlier this year, Tyson and Kemin Industries formed a strategic alliance to develop, manufacture, market and sell liquid and dry flavor-enhancers known as palatants, to the North American pet food market.

As for the recent avian influenza (H7N3) issue, Noel White notes that a routine test on a flock of Tyson breeder hens in Arkansas identified the presence of antibodies. This is not the high-pathogenic strain. The 15,000 chickens involved showed no signs of illness and the situation poses no risk to human health. Even though the affected birds did not currently have the virus, they were destroyed as a precautionary measure and will not enter the human food chain.

As a result of the discovery, the United States has voluntarily suspended any poultry exports from Arkansas to Russia for 90 days and Japan has implement a temporary ban. However, Tyson expects to continue to serve its customers in those countries by providing product from company plants in other states. Tyson officials do not believe this matter will have a material impact on the company’s business.

Source: Tyson Foods