© REUTERS/Adam Shrimplin/File PhotoThe exterior of the Tyson Fresh Meats processing plant is seen three days after a fire heavily damaged the facility in the Finney County town of Holcomb, Kansas, U.S. August 12, 2019.
The meat processor, which supplies about a fifth of the beef, pork and chicken in the United States, said Monday that it is shutting down four chicken plants - — two in Missouri, one in Indiana and one in Arkansas — following declining chicken revenue. The Arkansas-based company previously announced two separate closures in the spring.
The company reported earnings for the quarter ending July 1 that showed chicken revenue fell about 3.5%.
Volumes actually rose, but prices dropped 5.5%.
In the US at large, weaker demand in retail plus few discounts in restaurants pulled down prices for boneless chicken breast meat in the second quarter, according to a July report from Rabobank. Chicken breast prices were down 60% compared to the second quarter last year, when they were at record levels, due to a greater supply of chicken and plenty of alternatives like ground beef, according to the report.
Comment: Last year? When the US culled 12 millions chickens due to bird flu being detected in their flocks? Does this mean that there was a mass sell off, in an attempt by farmers to evade any threat of contagion, which pushed down prices?
With these plant shut downs, one could assume that Tyson doesn't expect these chicken stocks to be replenished, and so it has no need for the plants; and, if that's the case, does this mean that in the near future there will be a scarcity of chicken, and that prices will soar?
Tyson CEO Donnie King pointed to these market conditions when discussing Tyson's chicken sales decline during an analyst call Monday.
"Market conditions in chicken are still challenged with commodity prices across most cuts remaining significantly lower compared to last year," he said.
It's been a rough few years for Tyson on the chicken front. "We've had a number of fits and starts from the breeder side to demand," King said. A few years ago, Tyson said it had an "unexpected decline" in hatchings because of the types of roosters it used. And then, over the holidays, demand came in below expectations.
"November and December were softer than we expected or planned for in retail fresh chicken," King said during a February analyst call discussing results for the last quarter of 2022. That meant oversupply and, as a result, lower prices.
Since then, "we have aligned our supply to our demand," King said Monday. "We're on the right path."
Plant closures
In March, the company announced the closure of one chicken processing plant in Glen Allen, Virginia, and another in Van Buren, Arkansas. Altogether, it laid off nearly 1,700 workers as part of the closure. Monday's announcement brings the tally up to six closures announced this year.
"The facilities that we are closing... [are] typically smaller in scale and in need of major capital to make them viable," said King. He credited automation, among other factors, for allowing the company to close facilities while maintaining the right amount of supply. Tyson is not sharing the number of jobs impacted by the four closures announced today, a representative told CNN Monday.
The company is seeing challenges in other parts of the business, as well. Its pork volumes and prices both fell. Beef prices rose, but volumes also fell.
Tyson may take action on that side of the business, King said. "I'm not telling you that we're not looking at beef and pork in the same manner that we have looked at chicken," he told analysts. "We're evaluating everything."
Tyson (TSN) reported quarterly sales declined 3%, compared to the same period last year. The company posted a $417 million loss. Tyson (TSN)'s shares slumped about 6% in Monday trading.
Tyson said in April that it would lay off about 15% of senior leadership roles and 10% of corporate roles.
Comment: A similar trend has been reported over in Europe, with significant declines in meat purchases as consumers have struggled to cope with high inflation and energy prices.
When one considers how fragile the food supply chain already is, and at all levels, from production to processing and shipping; and how most aspects of it have become even more vulnerable of late what with a convergence of issues, including extreme weather, high energy costs, supermarket extorting suppliers, and huge culls over alleged contagions; and with countries already banning exports of certain goods in order to stave off potential unrest at home; taken together, the food supply is looking precarious, businesses know it, and it's clear that it won't take much to cause prices to surge and for shortages to start to bite: