US-based Tyson Foods, the world’s largest meat producer, has seen soaring grain costs hit its first-quarter profits – and force the company to withdraw its earnings guidance for the rest of the year.
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The company saw operating profit tumble by 42% to US$84m during the three months to 29 December.
Sales rose 3.1% to $6.8bn thanks in part to rising pork sales but Tyson president and CEO Dick Bond said rising commodity costs had weighed on the business.
“In November, we projected an additional $300m in grain costs for fiscal 2008,” Bond said. “We now think this year-over-year increase will exceed half a billion dollars. Because of these unanticipated and extraordinarily high corn and soybean meal costs, we have no choice but to raise prices substantially.”
He said rising grain costs had caused a “domino effect” of pushing up the cost of other raw materials. “Cooking oil, flour and other feed ingredients are all on the rise,” Bond warned. “For the foreseeable future, consumers will pay more and more for food, especially protein, because grain represents a proportionally higher percentage of input costs compared to other foods.”
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By GlobalDataBond then blamed “extreme volatility” in commodity prices for Tyson’s decision not to publish earnings guidance for the rest of the financial year.
“In this erratic and unpredictable operating environment, it is virtually impossible to make meaningful earnings forecast assumptions,” he added.
Late last week, Tyson said at least 1,500 jobs would be lost after it decided to end beef slaughtering at a site in Kansas. The company blamed over-capacity in the sector and said the size of the US cattle herd was not growing amid pressure on feed costs, as more corn is used for biofuel production.
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