CHICAGO, Ill. (Reuters) — Tyson Foods has posted strong results for its beef business in a quarterly earnings report as U. S. President Joe Biden’s administration continues to criticize high meat prices and fat processor profits.
Increased operating margins could attract more unwanted scrutiny from Washington for Tyson and three other industry behemoths that slaughter about 85 percent of grain-fattened cattle, analysts said.
The Biden administration, concerned about rising prices, said it plans to spend US$1 billion and issue new rules to address a lack of “meaningful competition” in meat processing.
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Arun Sundaram, senior equity research analyst for CFRA Research, estimates margins for Tyson’s beef unit reached 16 percent in October to December 2021 — the first quarter of Tyson’s financial year — due to higher meat prices. Margins were 13.2 percent a year earlier, when the unit reported quarterly sales of nearly $4 billion.
Analysts expect Tyson’s quarterly revenue from all its units including beef to come in at $12.177 billion, up 16 percent from a year earlier, according to Refinitiv Eikon.
The company is caught between its responsibility to boost profits for shareholders and the risk of increased government scrutiny, Sundaram said.
“I think they’re in a tough spot,” he said.
Tyson said meat prices increased due to market factors including the pandemic and severe weather and that the company raised prices to combat inflation.
In the quarter that ended on Oct. 2, Tyson said average beef prices soared 32.7 percent and the unit’s operating margins were 22.9 percent.
Ben Bienvenu, Stephens Inc. managing director of food and agribusiness, estimated Tyson’s beef margins were 15 percent in the latest quarter amid robust demand.
“There’s been a willingness of consumers to absorb higher prices,” Bienvenu said.
Meat packer JBS recently agreed to pay $52.5 million to settle litigation accusing U.S. beef processors of conspiring to limit supply to inflate prices and boost profits. The settlement renewed calls among U.S. senators for legislation to improve transparency in the beef market.
