Tyson Foods reported disappointing margins for its chicken business on Monday as market prices fell and grain costs rose.
But Tyson Foods, the world's biggest meat company, said its third-quarter profit was nearly obliterated because of skyrocketing grain costs.
Last month, the World Food Program said rising grain costs blew a hole of more than $500 million in its budget for helping millions of victims of hunger around the world.
Tyson said it expected more than $500 million in additional grain costs this year, well above the $300 million increase it forecast in November.
Yet while one tonne of grain costs roughly the same as 100 packets of pasta, by growing the new wheat, farmers can transform that one tonne of grain into 2,000 packets of pasta.
Kraft, which said increased dairy and grain costs would erode profit margins, managed to raise its full-year earnings projection by laying off workers, reassigning executives and lowering the company's tax rate.
"Beef prices weren't sufficient for ranchers to pay the high grain costs, so they cut back on production of cattle and chicken," said Clinton O. Mayer, an analyst with Burnham Securities.
Higher grain costs, for example, feed through into cattle prices.Clearly, at the top of the economic cycle, consumers will be so desperate to get their hands on raw materials that they will pay well over the cost of production.
Following the latest cuts, UK farmers now receive just over 23p for a litre of milk – compared to the 30 to 32p it costs them to produce – while energy and grain costs have risen considerably in recent years.
Higher livestock prices can, in turn, be explained by higher grain costs.In this section Love the one you're with Paint it black Curing SIV A stitch in time Too hot to handle Baltic blues Material world Intelligent design ReprintsBut the broad strength of commodity prices may also reflect the appeal of the sector as an "alternative asset", along with hedge funds and private equity.
