WASHINGTON – The ripple effect of high feed costs was the theme of a presentation by Donnie Smith, president and CEO of Tyson Foods, to attendees of the US Department of Agriculture’s Outlook Forum on Feb. 24. He pointed out that the profitability of producers, not consumer demand, is the driving force in the meat and poultry industry in today’s market and shrinking herds and flocks on a global basis are attributable to producers responding to “extremely volatile” corn and soybean prices, due in large part to growing demand for ethanol production.
For Tyson, this scenario is especially evident in its poultry business. Smith pointed out that corn used in poultry feed accounts for 55 percent of the wholesale cost of a whole, ready-to-cook pound of chicken.
According to the National Chicken Council’s Feb. 24 “Washington Report,” Smith said high corn prices have been “great news” for corn growers, but “challenging” and “a huge dynamic” for the livestock and poultry industry.
He also pointed out the challenges of rising energy costs, including a 57-percent increase in the cost of diesel fuel in Springdale, Ark., Tyson’s headquarters, since 2007. He made the point that slumping consumption trends are not necessarily indicative of lower demand. Consumer interest translates into demand, while consumption is “disappearance,” he said.
Globally, Smith addressed the increased dependence on export markets and the trend of more foreign investments being made in US meat and poultry companies.