Tyson Foods picks up with cheap corn buys through summer

Tyson Foods Inc. took advantage of a recent break in corn prices to cover most of its feed needs through the summer after recent dip, the company's chief operating officer said Wednesday (Mar 30).

Corn is a key cost for the company. While prices are well above historical averages, corn fell through most of March, with the May CBOT futures contract dropping almost 20% from an early March high.

After getting hammered by a volatile corn market in 2008, the company has since employed a more conservative hedging strategy, buying call options, which give the company the option to buy corn below existing market levels should prices rise.

With the recent decrease in prices, the Arkansas company is now "materially covered" in the fiscal fourth quarter, which runs through September, said Chief Operating Officer James Lochner.

Lochner added that he expects the corn market to remain highly volatile, but that high prices will persist. Prices have more than doubled since last summer, when they traded around US$3.25 a bushel.

"I think we're into a new normal with US$7 corn, and that strong relationship with corn and crude oil," Lochner said.