Tyson Foods (TSN) Continues to Struggle with Higher Input Costs

I continue to believe food inflation (agflation) will replace energy inflation as the "beef" (pardon the pun) of choice in 2nd half of 2008, mostly due to the delayed effects of high input costs making their way through the "food" (sorry) chain. We've been on this beat very early [Aug 29, 2007: Inflation in Groceries - Fed Between a Rock and a Hard Place] [Sep 5: Tyson Food Warns] [Nov 12: Tyson Foods Continues to Point to Food Inflation] but unfortunately we really have not benefited financially in this part of the investing spectrum - iPath DJ Livestock ETN (COW) has been listless at best, and the grain ETFs available to US investors are combinations of multiple commodities, some of which are going down while others go up - hence cancelling each other out sometimes. Corn has fallen quite precipitously along with crude oil (since it's all the same to speculators), and much better weather the past month in the US Midwest. This might bring some relief for this year's crops but again the world food production system has low stockpiles across the board, and we remain in constant perilous condition and having to hope for good weather.

Tyson Foods (TSN) out with another bad earnings report - to offset higher inputs they will have to raise prices as we've long predicted.

• Tyson Foods Inc., the world's largest meat company, said that third-quarter profit plunged 90 percent on the rising cost of grain to feed chicken and that it may take until next year to turn the trend around.
• The company earned $9 million, or 3 cents per share, compared with $111 million, or 31 cents per share, in the year-earlier period. Revenue rose to $6.8 billion from $6.6 billion.
• A survey by Thomson Financial, which generally excludes items, showed analysts expected Tyson to earn 12 cents per share on revenue of $6.99 billion in the period ended June 30.
• Tyson expects overall costs to increase an estimated $1 billion this year because of the skyrocketing costs of grain and other staples. Grain costs with which to feed chickens rose $140 million in the quarter, and are expected to jump $550 million for the whole of 2008, the company said. (no inflation in the US, move along - nothing to see here)
• Tyson has had problems raising its prices fast enough to cover the jump in feed grain expenses, but the company said it will continue to hike prices "over the next several quarters."

I continue to furrow through companies reports to find "real inflation" versus the fiction reported monthly by the government reports.

p.s. notice the folly of simplistic logic below in the chart over the past few weeks - wow, when crude drops $20 and gas drops 25 cents it's time to buy companies that have been hurt by inflation since everything will be "fine". Not so much.

Long iPath DJ Livestock ETN in fund; no personal position