Tyson officials see benefits from better world economies

Tyson Foods Inc. executives said they felt the company was poised to benefit from a recovering world economy through gradual demand increases and shrunken supply capabilities in other countries.

In a conference call following the company's release of its first-quarter 2010 earnings results Friday (Feb 5), officials said research shows consumers are feeling a little better about their position in the economy. Restaurant visits are up slightly, as are retail meat purchases, and export demand is poised to move up as the rest of the world begins to dig out from the recession.

President Donnie Smith and Chief Operating Officer Jim Lochner said the USDA's report of total red meat and chicken supplies in cold storage were down around 19% in December from a year earlier. This reduces the spot supplies that the market can draw upon when demand moves higher and would tend to support prices.

In addition, the executives said, production capacity has been cut in other parts of the world over the last couple of years, reducing the available supplies just as demand is beginning to rise.

Company officials added, however, that they do not see a surge in meat demand in 2010. For instance, restaurant demand was expected to decline less and less through the year, possibly reaching a bottom by late in the year. They did expect demand to be better, but they just did not expect rapid growth.

Tyson does not seem to be worried about the planned increase in production from competitor Pilgrim's Pride Corp. (PPC), saying global consumption is high enough. Tyson had cut production in the fall, but is now operating at nearly full capacity, which maximises plant efficiencies and positions it to better handle the competition.

The firm's strong fiscal first-quarter performance was attributed to dealing with the basics of capacity utilisation on a week-to-week basis, a process they expected to continue through 2010. There was no "magic bullet," they added.