Tyson Foods last week reported that it expects added costs of about $500 million for its grain and animal feed this year, as federal mandates for ethanol production continue to pressure corn prices higher, and soybeans continue to cede acreage to corn, resulting in lower yields.
“Because of these unanticipated and extraordinarily high corn and soybean meal costs, we have no choice but to raise prices substantially,” Richard L. Bond, Tyson Foods president and chief executive officer, told analysts. The company's chicken segment managed an operating income of $35 million in the first fiscal quarter of 2008, but its beef division was hit with an operating loss of $85 million.
Similarly, spring wheat futures were trading at record highs last week on the Minneapolis Grain Exchange. Wheat prices were already up sharply in 2007 due to poor yields and droughts in several regions of the world, among other factors, and retailers and suppliers have already passed through some of those costs to consumers.
“Current prices [for flour] are the highest we have ever paid in our own bakeshop,” Mary Ellen Burris, senior vice president of consumer affairs for Rochester, N.Y.-based Wegmans Food Markets, wrote in a recent online column. She added that the company has raised prices between 10 and 50 cents on bread and other items.