Tyson's Lochner addresses supply-demand issues

by Bryan Salvage
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NEW YORK – Growing protein and getting paid for input costs are more uncertain today than they used to be, said Jim Lochner, COO, Tyson Foods Corp., at the March 30 J.P. Morgan Protein Conference in New York. And meeting adjusting to fluctuating supplies and demand is never easy.

“I deal with a lot of customers who just say when supplies get short, ‘Make more,’” he said. “Well, there is a long lag time to ‘make more’ and to decrease it, as well. To make more in broilers, it is a nine-month proposition. In pork, it's a 19-month lag time. In the US beef model, it takes about 39 months to increase supplies.”

When discussing domestic availability of proteins, it boils down to how many units of animals are being processed, what's the weight and we have to add imports back in and we subtract exports. “That’s what drives domestic availability,” Lochner said.

Tyson’s business objectives are fairly simple, Lochner said. “We always to try to work very closely with our customers. We either go to a supplier, work on innovation or create demand,” he said. “Our mission is to raise prices as high as the market will bear and then add value on top of it. We want to be our customers’ go-to supplier. We realize we have to be best-in-class, we have to be very efficient because the market won't pay us for inefficiencies.”

Tyson focuses on removing costs and improving product availability across all segments. “And the more value you add to the by-product line, that adds to the total revenue,” he added. “So, our last thrust is to add as much revenue to the whole animal or animal part as we possibly can to increase our by-product values.”

When asked how Tyson executives are changing operations at processing and further-processing facilities to be more efficient, Lochner said they are continually committing capital expenditures into reconfiguring lines to increase efficiency or improve product mixes. They particularly try to remove double handling to drive as many one-piece flow operations as possible.

“Our cap ex has gone back very heavily into our core businesses and very heavily into the Chicken segment just to improve the overall efficiency mix, yield obtainment of the bird and bird processing,” Lochner added. “On the value-added side, we modernize cooking and freezing operations — we can add efficiency and capacity utilization in the same footprint.”
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