A report is out today that states feed costs are going to be impacting food companies quite heavily this quarter. A prime company that is going to be impacted is Tyson Foods (NYSE:TSN). As you know when I first wrote about I discussed that it was one of the largest food companies in the United States, and has been in business for 70 years. It is a powerhouse in its sector, but one of its largest expenses is of course feed to give its livestock. According to Bloomberg, feed prices are factoring into the stock valuation prices just a bit more this month. In fact, soybean and corn prices are both on the rise. Soybean commodity prices have risen for seven straight days, while corn has been on the rise for six straight days.
The main expenses of the company include purchased raw materials, live purchase costs, grow-out costs (primarily feed, grower pay and catch and haul costs), labor and manufacturing and production overhead. We scoured recent filings and were unable to locate direct figures for corn and soybean feed costs alone. However, there are a few key things we do know as it related to expenses. On the whole, cost of sales in Q1 was $8.03 billion. Cost of sales increased $49 million. Higher input cost per pound increased cost of sales $197 million while lower sales volume decreased cost of sales $148 million. The flagship product in chicken saw sales volume and average sales prices that fell 2.0% and rose 4.3%, respectively, year-over-year. Thanks to higher expenses operating income decreased in Q2 2017 to $233 million versus $347 million in Q2 2016. Sales volume decreased in the six months and second quarter of fiscal 2017 due to operational disruptions from fires at two of Tyson’s plants and decreased rendered product sales, partially offset by better demand for its chicken products. The company cited that feed costs were up in the quarter, as were promotional and marketing expenses. However, overall feed costs were down by $10 million in the quarter, but are up $10 million for the year thus far. While the exact amounts are unclear, what we do know is that the company sees feed costs being stable this year, in contrast to what the recent trend in corn and soybean suggests.