Tyson foods said its strong pork division helped deliver bigger-than-expected profits during its third quarter. But the chicken business remains a weak spot for the nation's biggest meat company.
Chicken prices have remained consistently weak over the last year as consumer demand remains stagnant even as companies keep producing more meat.
Tyson CEO Donnie Smith said he expects the chicken division to post a loss during the fourth quarter of the 2011 fiscal year. But he said production cuts made by Tyson and others should help bring down supplies, and boost prices during 2012.
Analysts repeatedly pressed Smith about the company's production cuts, asking how much Tyson planned to trim production. Smith wouldn't get specific, but said Tyson has cut production to align with weaker demand.
QUESTION: So just to make sure I understand, you guys are cutting in line with the industry, not exceeding it, just keeping up what whatever the industry numbers are, just to participate as a solid citizen type of thing. Is that fair?
RESPONSE: No. Our production adjustment is in line with what our forward-looking demand is ... And as we look forward, we look at the demand against our products. And so we take into account how much do we have in inventory, what's our production against that demand, what are our service requirements and how much production do we need to meet that demand.
And that's always what runs our math. Like a lot of folks, we got a little over-revved. The Lenten season had very strong demand. And when you make a production decision in chicken, you really make that three months out in advance ... And then when 4th of July was just OK at best, we knew it was time to change and that our demand forecast had shifted downward.