SPRINGDALE, Ark. — Higher grain and feed ingredient costs were partly to blame for a 4 percent decrease in income for Tyson Foods Inc. during fiscal 2011. For the year ended Oct. 1, the company had income of $750 million, equal to $1.97 per share on the common stock, which compared with $780 million, or $2.06 per share, during fiscal 2010. Sales for the year were $32,266 million, up 13 percent from $28,430 million during the previous year.

“In fiscal 2011, we produced record sales and our second-best EPS in company history despite record input costs, which included $675 million in additional feed and ingredient costs in our chicken segment,” said Donnie Smith, president and chief executive officer. “This is a testament to our quality, service and innovation and our focus on business fundamentals and operational efficiencies across all segments of our business.

“We will continue to build on the progress we’ve made in recent years and expect 2012 to be another strong year,” he added. “Midway into our first fiscal quarter, all segments are profitable.”

Tyson’s Chicken segment had operating income of $164 million during the quarter, down 68 percent from $519 million during the previous year. Sales for the segment were $11,017 million, up 9 percent from $10,062 million.

Operating income in the Beef segment fell 14 percent to $468 million from $542 million during the previous year. Sales for the segment were $13,549 million, up 16 percent from $11,707 million.

The Pork segment posted operating income of $560 million, up 47 percent from $381 million during the previous year. Sales for the segment were $5,460 million, up 20 percent from $4,552 million.

For the fourth quarter the company as a whole had income of $97 million, or 26c per share, down 55 percent from $213 million, or 57c per share, during the same quarter of the previous year. Sales for the quarter were $8,404 million, up 13 percent from $7,441 million.

During a Nov. 21 press teleconference, Smith elaborated on how Tyson returned to profitability in its Chicken business. “Part of it has been we have right-sized our supply and demand balance,” he said. “In Q4, we talked about cutting production back about 6 percent....we ended up cutting a little more than that. During the early part of Q4, we had too much production coming at us for the demand that materialized. So we spent most of the front half of Q4 taking production cuts. July was a pretty ugly month for us. August was better but still negative. September was better yet.”

Tyson has spent a lot of money in its plants the last couple of years, Smith said. “Those operating efficiencies are coming into play,” he added. "Our live production has improved, costs have come down a little since then as well. Our pricing has improved relative to where we were in the 4th quarter.

“It’s the total portfolio of our business that has improved,” he continued. "That gives us a lot of confidence to continue to say we believe we'll get progressively better as we move on through this fiscal year.”

Tyson’s production decisions are based much more on demand for its products than they are for the cost of corn and soybean meal, Smith said. “Our production decisions will be based on what we view forward demand will be, how much production we need to produce in order to relate to that demand,” he added.

“In terms of deciding what corn prices need to be in order for us to grow more or less chicken, we don’t even look at it that way,” he continued. “We produce chickens to meet customer demand. Our job is to pass along whatever the cost structure is at the end of the marketplace to get paid fairly for the work we do to create value for the customer. The price of corn is what it is. We’ll pay what we need to pay to buy the corn to feed our chickens and work on adding value to our customers.”

As consumers continue to feel strain on their wallets, they’re looking for value, according to Smith. “If we can take a different raw material and create a value item that can retail for less in the marketplace, that’s going to drive consumer demand,” Smith said. “Those are the type products we’re working on with our customers ... to try to change, perhaps, to using chicken [instead of beef or pork] in lunchmeat, sausage or pepperoni. Maybe we can find a way to add more dark meat into the meat block on some of the further-processed type items. These are ways we can provide a great quality product at a value to the retailer and consumer.”

This works the same way at foodservice. “In quick-service restaurants, I think you’ll see those folks featuring a lot more chicken this coming year as an alternative to fairly high ground-beef prices,” Smith said.