Tyson’s profits soar amid higher meat prices

Diving brief:

  • Tyson reported double-digit increases in profit and sales last quarter, with operating profit up 40%, according to its first quarter earnings report this week. Sales increased 24% year over year. After Tyson released its latest financial statements, its shares jumped 12% to $99.20, an all-time high, CNBC reported.
  • The growth came as the company passed on rising costs for labor, transportation, food and more, with its average selling price rising 19.6% from the previous year. same period the previous year, CEO Donnie King shared during the call for business results.
  • Tyson’s higher profits in the face of soaring meat prices are likely to draw more attention from the Biden administration, which has criticized the industry for a lack of competition, a dynamic it says has led to an increase costs for consumers.

Overview of the dive:

Overall, meat prices have risen 13% over the past month, according to NielsenIQ Data quoted by Forbes. But even as meat prices rise, in part due to supply chain issues and higher manufacturing costs, demand continues to grow. Tyson’s latest earnings report clearly demonstrates this momentum.

Input costs for the business have increased significantly, according to Tyson. Labor costs are up 20% this year, grain is up 29% and live livestock costs are up 22%, King said on the earnings call. The company spent $185 million on additional feed costs, while transportation costs rose 32%, according to Tyson.

Meanwhile, demand for many of Tyson’s meat products continues to grow. The chicken segment in particular drove sales up 37% year over year. King pointed to the success of Tyson’s value-added chicken, which has garnered more attention and investment from the company.

King said the demand for its products is so high that it has exceeded its ability to supply them. This, combined with higher input costs, labor shortages and capacity constraints, has driven prices higher.

“We are not asking customers or the consumer to pay for our inefficiencies. We’re asking them to pay for inflation,” King said on the earnings call. “And the rest of what we do is we try to find ways to be more productive, reduce costs and increase throughput, etc.”

On the earnings call, King noted Tyson’s investments in automation to tackle labor shortages, which has allowed the company to use technology to fulfill its most important roles. difficult in meatpacking plants. In Tyson’s Productivity Plan unveiled in decemberthe company announced that it will invest $1.3 billion over the next three years in new automation capabilities.

Despite Tyson’s explanations behind his price increases, he is unlikely to satisfy the Biden administration. In January, the the president himself criticized the four largest producers of chicken, beef and poultry for their market dominance, which he said is driving up prices and hurting consumers.

In a forum, financial analyst Jamie Powell of the Financial Times called the good fortune of the company a “reminder that in an economy where rising wages and supply chain bottlenecks are driving inflation, companies that sell things people want can not only face the higher costs, but profit from it.”

News of Tyson’s strong profits comes as the meat industry continues to settle a series of lawsuits that have accused different players of price-fixing. Last week, JBS became the first meat packer to strike a deal with grocers and wholesalers in an antitrust lawsuit that accused him, along with Tyson, Cargill and National Beef, of colluding to suppress cattle slaughter amounts to raise beef prices. The Brazilian meat giant agreed to pay $52.5 million, but admitted no wrongdoing.

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