Tyson Foods announced on Monday that it’s raising its full-year sales outlook to as much as $3 billion above expectations as the cost of beef and poultry spike.
Tyson projected annual sales between $52 billion and $54 billion, compared with its prior estimate for the upper end of a $49 billion to $51 billion range. Analysts on average expect $51.79 billion, according to Refinitiv IBES data.
‘The supply chain and the consumer is more inelastic than what we had modeled in,’ King told reporters.
Russia’s war on Ukraine is continuing to have a ripple effect through the global economy, with food prices expected to soar next. Above is the U.S. Department of Agriculture’s CPI forecast through 2022
Consumers remain hungry for meat products, though some are looking to downgrade from steak to hamburger to keep within budget
Average prices for Tyson’s beef climbed by 23.8 percent in the quarter that ended on April 2, compared to a year earlier, the company said. Chicken prices jumped 14.4 percent and pork prices rose 10.8 percent.
It’s not all gravy for the beef and poultry company, though, the meatpackers in general have come under suspicion from the Biden administration and Congress over the high cost of their products.
Consumers remain hungry for meat products, though some are looking to downgrade from steak to hamburger to keep within budget, Tyson CEO Donnie King said.
The president has blamed a lack of competition in the industry for the rise in prices.
Russia and Ukraine collectively account for 29% of all wheat exports and Ukraine is also one of the world’s top producers of corn, barley and various cooking oils. Though the U.S. gets most of its own wheat at home or imports it from Canada, meaning it could be spared from the harsh impact felt by other countries
Tyson countered that the rise in prices were to compensate for increases in labor and the cost of goods like animal feed.
The Arkansas-based company also raised its forecast for profit margins in its beef business to 11 percent to 13 percent.
Shares in the company rose 1.6 percent in afternoon trading after the news broke.
With the advent of plant-based meat products, some analysts believe the meat industry could be overplaying their hand.
Arkansas-based Tyson Foods raised its forecast for profit margins in its beef business to 11% to 13 percent
Tyson’s beef climbed by 23.8 percent in the quarter that ended on April 2, compared to a year earlier, the company said. Chicken prices jumped 14.4 percent and pork prices rose 10.8 percent
‘Looking ahead, we have concerns about consumers shifting away from meat and/or downtrading,’ said Michael Lavery, senior research analyst for Piper Sandler, in a note.
The Biden administration has announced steps to increase competition in the meat sector as the White House is fighting inflation.
Tyson received a subpoena dated April 21 from the New York attorney general’s office seeking information on meat prices, sales and production costs, the company said in a regulatory filing. Tyson is evaluating the subpoena, the filing said.
The company’s costs are up 23% for cattle and 20% for grain, King said. Higher grain prices increased the quarterly feed bill in Tyson’s chicken business by $100 million from a year earlier, according to the company.
‘We are asking the customer and ultimately the consumer to pay for the inflation that we’re seeing throughout the supply chain,’ King said.
Quarterly sales rose to $13.12 billion from $11.30 billion a year earlier, beating expectations of $12.85 billion. Adjusted earnings per share were $2.29, up from $1.34 a year ago and above estimates for $1.91.
Tyson has come under scrutiny before for inflating the cost of their products. Last January, the company paid out a whopping $221.5 million to settle lawsuits by three groups that accused them of pumping up the prices.
Pilgrim’s Pride Corp, which is owned by meatpacking powerhouse JBS SA out of Brazil also paid $75 million to settle federal lawsuits accusing it of inflating prices.
Consumers in the U.S. and around the world are facing tough decisions at the supermarket if they want to stay on budget.
The most recent numbers from the Bureau of Labor Statistics show that costs of meat, poultry, fish and eggs edged up 1 percent in March. Grains and cereals jumped 1.5 percent. Non-alcoholic products, milk and dairy goods rose 1.2 percent.
Menu prices in restaurants jumped nearly 7 percent from last year in March. One of the greatest indignities hungry consumers have had to stomach was the spike in the price of Big Macs, which cost 7.2 percent more this year because of supply chain and labor cost increases.
This chart shows how the price of the average Big Mac has risen by 7.2 per cent in a year from $5.63 to $6.05
After watching inflation hit 8.5 percent in March, the Fed stepped in, upping interest rates by half a percentage point and pegging the target rate of inflation at 1 percent.
The central bank will also begin selling of its $9 trillion balance sheet by selling off its bond holdings.
‘Inflation is much too high, and we understand the hardship it is causing, and we are moving expeditiously to bring it back down,’ Fed chair Jerome Powell said in the beginning of May.
Powell has said that his goal is create a ‘soft landing’ that reduces inflation without causing a recession.
Critics charge that the Fed waited too long to combat inflation, which the chairman had claimed was temporary.