Shed No Tears For Poor Tyson
By Rick Tolman
CEO, National Corn Growers Association
Tyson Foods, the self-proclaimed “world’s largest processor of meats” and the second largest Fortune 500 food processor, has been a strident and leading voice in stirring up the “food versus fuel” furor. Way back in December, Tyson CEO Richard L. Bond told a group of investors: "I believe the American consumer is going to have to pay more for protein. Quite frankly, the American consumer is making a choice here ... either corn for feed or corn for fuel."
I sat in the audience at the Consumers Analyst Group of New York annual meeting in Scottsdale last March, the largest gathering of food analysts in the nation, and listened as senior officials from Tyson laid out in strong terms the negative financial impact on their company from $4+ corn and the significant increase in the cost of production they were facing from the “doubling in corn prices,” as well as their bleak future.
Later that same month I had a rather animated conversation with Tyson representatives outside of a Senate Agriculture Committee Hearing on the impact of corn prices on the livestock industry, after listening to poultry industry testimony indicating that their average corn cost for 2007 would be over $4 a bushel. I questioned that figure as an average cost when USDA was then forecasting a season average price of $3.20 a bushel. When they insisted that was what they would average, I offered to take the job of being their buyer of corn and promised to be able to significantly alleviate their costs if $4 corn was the benchmark. They declined. (And yes, this was the same hearing where a representative of the pork industry submitted written testimony stating that one could not buy corn at any price in the state of Nebraska.)
I felt even worse for Tyson after reading an article in the March 26 issue of Feedstuffs, where they reported on a recent study completed by Tufts University. The article “Broiler, hog industries save billions from corn” points out that during the 9 years between 1997 and 2005, corn was priced 23 percent below average production costs. The studied estimated that Tyson alone saved $2.59 billion dollars or $288 million a year over that time period due to low feed prices. Only $2.59 billion?
In late April, I read that Tyson had announced their second quarter and six months results for their fiscal year 2007. Brace yourself, I thought. Here is where the red ink will really and finally show up, as this matched the same time period as the increase in the price of corn. I was very surprised by what I read. Second quarter earnings per share were $.19 compared with a loss of $.37 a year earlier and earnings guidance for the full year was raised from $.50 - $.80 a share to $.65 - .90 a share with “all segments profitable” across the company. Mr. Bond reported that “quarterly operating income improved $300 million over the same period last year.” According to Mr. Bond, “this was our strongest performance since the fourth quarter of fiscal 2005.” Over that same time period, Tyson stock price has gone from just over $14 a share to about $22 a share. Wow!
I am honestly concerned about the average livestock producer and the tighter margins they face. Livestock is our number one customer and we want the livestock industry to be strong and profitable. I also am concerned about retail food prices. I have five children and they love a good hamburger or chickenburger. We certainly do not want to be a cause for significant retail price increases. And, I certainly feel badly for the plight of the poor around the world. We have a duty and an obligation to do what we can to lift their lot in life. But the fact is that nothing close to what has been reported in sensational headlines regarding the impact of the price of corn on food and on the poor has occurred.
There is no conflict between food and fuel and no need for there to be one. Most of the comments to the contrary are disingenuous and self-serving. Carefully look at the facts. American farmers, with corn producers leading the way, have, can and will meet our domestic and international commitments for food and feed and still make a significant and growing contribution to lessening our dependence on imported oil. Tyson and other critics sadly underestimate your productive capability and unfortunately tout their own self interest with misleading headlines and soundbites of fear and doom and gloom.
I for one will shed no tears for Tyson. They need no tears. Their comments and sound bites have been irresponsible, misleading and self serving.Source: National Corn Growers Association