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Tyson’s meat production falls amid labor shortages

Labor challenges cut production volumes for Tyson Foods Inc. in the latest quarter, but the meat company’s sales grew year over year as it passed along higher prices to supermarkets and restaurants.

Tyson’s volume fell 11% overall in the three months through September, including a 15% decline in beef production and an 18% reduction in pork production, Tyson said Monday. In both cases, worker shortages posed a challenge as the meat company struggled to meet strong demand.

Meanwhile, as Tyson tried to share the impact of higher animal and freight costs with customers, pricing rose by double-digit percentages across several meat categories, boosting Tyson’s overall sales and profit. Average beef prices rose by a third compared with last year, while pork prices were up by 38%.

The rising prices lifted Tyson’s revenue by 12% to $12.81 billion in the quarter. Earnings rose to $1.36 billion, or $3.71 a share, from $654 million, or $1.79 a share, in the same quarter last year.

Stripping out one-time items, Tyson’s adjusted profit was $2.30 a share. The results beat the expectations of Wall Street analysts, who had been forecasting an adjusted profit of $2.22 a share on sales of $12.66 billion, according to FactSet.

Tyson’s stock was roughly flat in premarket trading Monday.

The company’s brands include Jimmy Dean, Hillshire Farm, and Ball Park as well as its self-branded products.

The meat industry, like many, has faced challenges spinning up production to meet high demand as the pandemic eases. For Tyson, hiring has been one obstacle. In August, Chief Executive Donnie King said that 10% of jobs at its plants were unfilled on any given day.

Covid-19 ravaged the industry’s workers last year during the first wave of the virus’s spread in the US Staff who worked in close quarters on processing lines were especially vulnerable. A report last month by a congressional committee found that infections and deaths in the industry were approximately three times as high as earlier estimates, based on a review of Tyson and several competitors.

In August, Tyson became one of the first major corporate employers to require workers to get vaccinated, with a mandate that went into effect on Nov. 1. As of late October, 96% of Tyson workers had been vaccinated, Mr. King said. The number of infections among workers has declined significantly as more sought vaccines, he added.

In addition to making it harder to find workers, the pandemic has also raised Tyson’s expenses as the company paid for protective equipment and sanitation. In the 12 months through September, Tyson spent $335 million on such items. Those expenses have abated somewhat compared with last year, when Tyson’s Covid-19 spending was about $540 million.

In 2021, rising prices for animal feed and higher packaging and shipping costs have also added to Tyson’s expenses. In response to higher costs, the company has been raising the meat prices it charges supermarkets and restaurant customers.

The Biden administration in September said it was scrutinizing the meat industry’s competitive landscape, accusing a small group of companies such as Tyson and JBS USA Holdings Inc. of holding too much power to set beef prices. Tyson has responded by arguing that meat prices have risen because of the pandemic’s unprecedented conditions.

Along with labor shortages, severe weather also contributed to lower production in the latest quarter, Tyson said. The company cited climate conditions as a factor in lower beef and chicken production.

Tyson raised its annual dividend rate by 3%. Looking ahead, it forecast that its sales will rise in the next fiscal year to between $49 billion and $51 billion, compared with $47.05 billion in the fiscal year that just ended.

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