Tyson Foods CEO: Beef Prices Driven by Consistently Strong Demand, Constrained Production and Record Inflation
April 26 2022 - 1:17PM
A combination of market forces, including consistently strong
demand for finished beef, constrained production due to labor
shortages caused by the global pandemic, and record inflation, have
been driving current beef prices, Tyson Foods President & CEO
Donnie King says in prepared testimony delivered to the U.S. House
Agriculture Committee. The testimony, which can be found here, was
presented in advance of a hearing on Wednesday.
King makes the following points in his testimony:
- As with nearly every other product, basic market forces
drive beef prices: “Tyson does not set the prices for
either the cattle we buy or the beef our customers purchase. These
prices are set by straightforward market forces, namely available
supply and demand.”
- An ongoing labor shortage – largely the result of the
pandemic – has constrained beef production while consumer demand
for beef continues to skyrocket: “We just didn’t have
enough people to fully staff our plants,” which resulted in a
“sudden and swift rise” in the oversupply of cattle and a
corresponding drop in cattle prices. At the same time, “the price
for finished beef—the beef that consumers buy at grocery stores—was
rising, driven by skyrocketing consumer demand” and “basic
economics holds that when demand is high and supply is low, prices
will rise, which is precisely what they did.”
- The situation has been deepened by geopolitical issues,
which are resulting in higher costs: “The dramatic rise in
input costs is reflected in the prices American families pay at the
grocery store.” For example, since March 2020, the cost of corn is
up 127% and cost of soybeans are up 90%. Both are used in livestock
feed, which comprise 65% of the cost of chicken and approximately
30% of the cost of finished beef. Freight transportation costs are
also rising, with international shipping container rates up 68% and
diesel fuel up 104% year over year.
- Economists agree that American businesses are not to
blame for inflation: “Experts, policymakers, and
government regulators understand that the cause of the current
inflationary environment is some combination of constrained supply,
high consumer demand, and continued unforeseen disruptions to the
global supply chains caused by COVID-19 and exacerbated by
geopolitical unrest.” Lawrence Summers, the former Treasury
Secretary, observed that “Rising demand, with capacity and labor
constraints, are fully sufficient to account for what we observe in
meatpacking.”
- High prices have nothing to do with industry
consolidation: Concentration in the beef processing
industry has remained virtually unchanged over the last 30 years.
During that time, data shows that ranchers more-often-than-not
achieve higher profit margins than beef processors. “In fact, in
several years, ranchers made historic profits on live cattle while
beef processors either lost money or barely broke even.”
- Tyson Foods produces quality food at market
prices: “With advancements in how we
source cattle and improvements in modern cattle production, the
beef we produce today is consistently higher quality. For example,
choice and prime beef grades have increased from 60 percent in 2000
to 85 percent in 2020.” Tyson Foods’ returns “are also strengthened
by our efforts to become a more agile and efficient company through
innovation and automation” helping the company to “keep costs to
consumers lower, enable us to pay our team members more and allow
us to further reinvest in our business.”
- Tyson Foods continues to invest in America, and the
people who call it home: In America, the company invests
more than $15 billion a year with more than 11,000 independent
farmers and feedlot operators who supply cattle, pigs, chickens and
turkeys. The company has facilities in 30 states and last year
implemented $500 million in wage increases and bonuses for hourly
team members. Tyson Foods is also piloting childcare programs and
health clinics and recently announced the expansion of educational
opportunities that will be offered to team members for free.
King is the second Tyson Foods executive to recently testify
before Congress on beef industry matters. Shane Miller, who leads
the beef and pork unit of Tyson Foods, testified before the Senate
Judiciary Committee in July 2021.
About Tyson FoodsTyson Foods, Inc. (NYSE: TSN)
is one of the world’s largest food companies and a recognized
leader in protein. Founded in 1935 by John W. Tyson and grown under
four generations of family leadership, the company has a broad
portfolio of products and brands like Tyson®, Jimmy Dean®,
Hillshire Farm®, Ball Park®, Wright®, Aidells®,
ibp® and State Fair®. Tyson Foods innovates continually
to make protein more sustainable, tailor food for everywhere it’s
available and raise the world’s expectations for how much good food
can do. Headquartered in Springdale, Arkansas, the company had
approximately 137,000 team members on Oct. 2, 2021. Through its
Core Values, Tyson Foods strives to operate with integrity, create
value for its shareholders, customers, communities and team members
and serve as a steward of the animals, land and environment
entrusted to it. Visit www.tysonfoods.com.
Contact: Gary Mickelson, 479-236-9022
Category: IR
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