August 10, 2023

Tyson Foods to close four US chicken plants

Tyson Foods has reported third-quarter revenue and profit that fell short of Wall Street expectations, resulting in plans to assess its operations comprehensively, including the closure of four additional US chicken plants, in a strategic effort to cut costs, Farm Journal's Pork reported.

Due to a decline in chicken and pork prices, as well as a slowdown in demand for its beef products, Tyson's shares closed down by about 4% on Monday, following a previous drop of nearly 10%.

The shift in the market landscape has affected various meat companies that had previously benefited from soaring prices during the COVID-19 pandemic. Now, they are contending with the adjustment to lower prices and decreased demand for certain products. Notably, Pilgrim's Pride, a major global chicken producer, also experienced a decline in sales compared to the previous year during the most recent quarter.

To adapt to the changing circumstances, Tyson Foods has already taken measures such as reducing corporate jobs and closing other chicken plants earlier in the year. These decisions stem from the company's efforts to counter falling profits and the impact of reduced consumer demand, driven by inflation and higher interest rates.

Analyst Arun Sundaram, an analyst from CFRA Research, said that it was another challenging quarter for Tyson, as the macro backdrop remains unfavourable for commodity protein processors.

Tyson anticipates the closure of operations at the four chicken plants in the first two quarters of its fiscal year 2024, with projected charges ranging from US$300 million to US$400 million.

Reflecting on past predictions, Tyson acknowledged a miscalculation in anticipating strong chicken demand at supermarkets during the previous year's November and December. This led to the replacement of the president of its poultry business in January.

Despite these setbacks, Donnie King, chief executive officer of Tyson Foods, expressed a more optimistic outlook for the chicken business, highlighting that the current landscape presents more favourable conditions compared to the previous quarter.

-      Farm Journal's Pork