Shares of Tyson Foods Inc. surged to a nine-month high after the company reported a stronger-than-expected, $298 million quarterly profit and said it expected favorable results the rest of the year as shrinking supplies and growing demand support beef and pork prices.
Supplies of fattened cattle are expected to decline 1 percent to 2 percent in 2011 from 2010 levels, while hog inventories are expected to be comparable to last year, Springdale, Ark.-based Tyson said in a Feb. 4 statement, repeating a previous outlook.
“Our view of 2011 is basically the same as it was a few months ago,” Donnie Smith, Tyson’s chief executive officer, said in the statement. “Beef and pork are off to a great start, and their combined results in 2011 should be similar to 2010.”
The largest U.S. meat processor, Tyson’s recent profit upswing reflects resurgence across U.S. beef and pork industries. In Tyson’s fiscal 2010, the company posted net income of $780 million after losing $547 million in 2009.
While Tyson is paying more for slaughter-ready cattle and pigs, it’s also benefitting from rising meat exports and higher prices passed along to supermarkets, restaurants and other customers. The average price Tyson received for its pork jumped almost 24 percent in the most-recent quarter, while beef prices rose 16 percent.
Still, soaring corn a soybean meal costs are a growing problem for beef and pork producers. Corn prices are up about 92 percent from year-ago levels and today reached a 30-month high at nearly $6.79 a bushel, based on Chicago futures.
During a conference call with reporters earlier today, Smith said he is “obviously concerned” about the prospect of even higher corn prices, but added the company is in “pretty good shape” on feed supplies for the current and following quarters.
“We’ve done everything we can do to run the type of operation we want to,” Smith said. “We’ll manage it as well as we can.”
Tyson expects to spend $500 million more on grain in its fiscal 2011 compared with 2010, according to the Feb. 4 statement. That would be a 12.5-percent increase over the approximately $4 billion the company spent on grain last year, according to an estimate from Stephen Share, a food industry analyst with Morgan Joseph TriArtisan LLC in New York.
Tyson also expected retail beef and pork prices to continue rising this year amid tight supplies, contributing to food inflation.