Tyson Foods Riding Chicken to Success

By Justin Rohrlich Apr 22, 2010 12:15 pm

But one man -- Bolivian President Evo Morales -- is firmly against increased chicken consumption.

• It’s official -- chicken is on a tear.
  
  McDonald’s (MCD) recently beat estimates due, in part, to “sustained sales growth across our entire chicken category.”
  
  More ink has seemingly been devoted to KFC’s (YUM) Double Down sandwich than to the Kennedy assassination.
  
  And, if Tyson Foods’ (TSN) second-quarter results (the company reports on May 9) are anything like the food processor’s first-quarter results, look for the chicken business to be its star performer.
  
  From Tyson’s most recent 10-Q:
  

Chicken -- First-quarter fiscal 2010 operating income was $78 million, or a 3.2% operating margin, an improvement of $364 million as compared to the same quarter last year. We expect seasonal demand will improve as we get further into fiscal 2010, and we expect the pricing environment to improve aided by cold storage inventories and pullet placements, which are down relative to the levels we have seen over the last several years. We also currently expect to see grain costs down as compared to fiscal 2009. Additionally, we will continue to focus on making operational improvements to help maximize our margins.

It’s clear that Tyson is somewhat less excited about beef:

While we expect a reduction in cattle supplies of approximately 1% in fiscal 2010, we do not expect a significant change in the fundamentals of our Beef business as it relates to the previous few quarters. We expect adequate supplies to operate our plants. We will manage our spreads by maximizing our revenues through product mix and minimizing our operating costs, while keeping our focus on quality and customer service.

Pork:

We expect to see a gradual decline in hog supplies through the first half of fiscal 2010, which will accelerate into the second half of fiscal 2010, resulting in industry slaughter slightly higher than 2007. However, we still believe we will have adequate supplies in the regions in which we operate. We will manage our spreads by continuing to control our costs and maximizing our revenues.

And Prepared Foods:

Raw material costs will likely increase in fiscal 2010, but we have made some changes in our sales contracts that move us further away from long-term fixed price contracts toward formula or shorter-term pricing, which will better enable us to absorb rising raw material costs. However, in the second quarter fiscal 2010, we will see a negative impact until some price increases take effect.

But, if Bolivian President Evo Morales, a close ally of Venezuela’s President Hugo Chavez, is to be believed, Tyson, along with other names in the chicken space, including Pilgrim’s Pride (PPC) and Sanderson Farms (SAFM), have some ‘splainin to do.

At a global climate change summit on Tuesday in Cochabama, Morales suggested that eating chicken causes homosexuality.

“The chicken that we eat is chock-full of feminine hormones. So, when men eat these chickens, they deviate from themselves as men,” he proclaimed.



Cesar Cigliutti, the president of Comunidad Homosexual Argentina, said, "It's an absurdity to think that eating hormone-containing chicken can change the sexual orientation of a person. By following that reasoning,” he continued, “if we put male hormones in a chicken and we make a homosexual eat it, he will transform into a heterosexual.”

However, there is no “reasoning” to follow. Chickens don’t contain artificial hormones -- and haven’t since 1952, when federal regulations deemed them illegal for use in poultry production.

“There are no hormones given to chickens or added to chickens.” Richard Lobb, communications director for the National Chicken Council, tells Minyanville. “Certainly not in this country, and I can’t imagine they do it in Bolivia, either.”

What’s more, chicken growth “would not be increased with the use of hormone additives,” according to a study by K. E. Anderson and A. G. Gernat of the Department of Poultry Science at North Carolina State University.

“The genetic selection that developed today’s broiler has resulted in an animal that multiplies its hatch weight by 65 times within a seven-week period,” they write. “The genetic selection has resulted in an animal which grows to its physiological limit. It would be counterproductive to try and stimulate a broiler, layer or turkey to exceed their physiological growth limit. If this was done it would most certainly result in a doubling, tripling, and possibly quadrupling of the mortality rate.”

Perhaps Gary Truitt, president of Hoosier Ag Today, summed it up best when, in a phone interview, he asked, “What are they smoking down in Bolivia these days?”