November 30, 2006


Tyson sees higher prices for poultry, beef and pork products



Tyson Foods Inc, the world's largest meat processor, Wednesday (Nov 29) forecast higher prices for beef, chicken and pork as grain costs climb.


"All three species will see supply reductions to get an immediate increase in price" to offset feed costs, a company executive told an investors' conference in New York.


"You're already seeing that in publicly reported markets," James Lochner, senior group vice president for fresh meats and margin optimisation, said at a JP Morgan Securities-sponsored conference, which was webcast.


Lochner tied soaring corn to competition between livestock feeders and ethanol producers for the grain. "As fuel competes for feed we will see an increase in prices," he said.


In fact, Tyson already has taken "a couple of price increases in recent months...and we will continue to do that," another senior officer, Wendy Davidson, told conference attendees. "You will see a lot of pricing discipline going forward," she said.


Tyson, as have others in the poultry business, previously announced reductions in the number of chickens being raised, partly in response to higher input costs. That move is expected to result in consumers, both in supermarkets and food-service outlets, paying more for chicken.


"A value-added producer like us gets an advantage when poultry production" shrinks, Lochner said.


Tyson also has an advantage in operating beef and pork processing plants close to livestock feeding areas, he said, since transportation is an expensive cost component.


"Beef is a dime per head per mile to move," he said, "so regional capacity utilisation is critical".


Lochner also predicted that cattle and hogs coming to market are likely to weigh less as feed prices rise, since the most expensive gain is the last 100 pounds on beef and 20 pounds on pork.


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