January 29, 2008

Tyson to shorten pricing contract cycle to recoup feed costs

Tyson Foods looks on shortening its pricing cycles for food service and retail customers to allow more flexibility in the face of volatile feed grain costs, CEO Dick Bond said.

Bond said the company is talking to its customers about shortening the length of pricing agreements, as well as going to cost plus pricing.

Tyson forecasts a US$500-million increase in feed grain costs in 2008.

Currently, the company is costing corn at just under US$4.00 per bushel and expects those costs to quickly rise to about US$4.90. Bond explained that Tyson incurs about 40 to 60 cents per bushel in costs above the raw purchase price.

On Friday, corn futures for March delivery closed at US$4.98 per bushel.

Despite higher prices, Tyson is optimistic about a strong demand for chicken and has not changed its bird weights at certain plants.

However, Bond informed that the company will not build any new hatcheries in 2008.