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What does"commodity minded" mean at Tyson?

pointrider

Well-known member
Tyson's new CEO Bond has stated publicly that one of his goals to return Tyson to profitability is for the company to become more "commodity minded" in the commodity portion of the business. Tyson is a leader in the production and sales of value-added products, but more than 50% of their business is still in the commodity category.

"Commodities" normally carry a lower gross profit margin than value-added products. What do you think he means when he says they need to become more "commodity minded?"
 

Econ101

Well-known member
commodities are products that usually have low margins because of lack of product differentiation and many suppliers/buyers--ie a competitive market. The money is made in large volume, not large margins.
 
A

Anonymous

Guest
pointrider said:
"Commodities" normally carry a lower gross profit margin than value-added products. What do you think he means when he says they need to become more "commodity minded?"

Means he's got his eye on a lot of South American generic beef he can pass off as an unlabeled, ungraded, US product........
 

Econ101

Well-known member
Pointrider, I hate to read minds here, but after the Pickett case, I think he intends to continue and maybe expand on the same kind of market manipulation that was successful for them before. Now they have been given a free wave by the judicial system to continue and increase their fraudulent behaviors.

They have international positions, competing meats positions, and possibly other things we don't know about. They will use these positions to run out competitors so they can eventually raise their profitabilty. They may settle with an oligopoly model with implicit collusive activity to make their additional profits.

It is the concentration game.

What is your view of this quote, pointrider?
 

DiamondSCattleCo

Well-known member
I'm not sure how you become "more commodity minded" in the commodity portion of their business. I suspect that they're referring to selling sides or carcasses to other processors/stores with their own butcher shops as the "commodity" portion of their business. I don't have a sniff what kind of volume you'd have to do to place an order for non-processed beef from Tyson, but perhaps they're talking about increasing minimum volume requirements?

Rod
 

rkaiser

Well-known member
Are cattle not a commodity guys? I'd say he is refering to more ownership, or more integration like his Cargill cousins.
 

RobertMac

Well-known member
Brad S said:
comodity minded = lowest cost producer

OT said:
Means he's got his eye on a lot of South American generic beef he can pass off as an unlabeled, ungraded, US product........

Randy said:
Are cattle not a commodity guys? I'd say he is refering to more ownership, or more integration like his Cargill cousins.

Econ said:
It is the concentration game.

Watch out for 'regional FMD free' trading zones...the door that opens the trade with SA...world's lowest cost producers and largest supply of cattle.

What is your view of this quote, pointrider?
 

RobertMac

Well-known member
DiamondSCattleCo said:
I'm not sure how you become "more commodity minded" in the commodity portion of their business. I suspect that they're referring to selling sides or carcasses to other processors/stores with their own butcher shops as the "commodity" portion of their business. I don't have a sniff what kind of volume you'd have to do to place an order for non-processed beef from Tyson, but perhaps they're talking about increasing minimum volume requirements?

Rod

Rod, Tyson is the leader in case-ready and convenient meals...they are about cutting out middle men!
 

DiamondSCattleCo

Well-known member
RobertMac said:
Rod, Tyson is the leader in case-ready and convenient meals...they are about cutting out middle men!

I thought about that RM. Look at it this way: They increase the minimum purchase amount, so that means smaller processors can't buy from them. Those small time guys have to go elsewhere, possibly to the guys who CAN buy from Tyson. But now it costs them more. So in effect, they have reduced margins and they eventually close up shop. Middle man effectively eliminated, all legal like.

Rod
 
A

Anonymous

Guest
RobertMac said:
Brad S said:
comodity minded = lowest cost producer

OT said:
Means he's got his eye on a lot of South American generic beef he can pass off as an unlabeled, ungraded, US product........

Randy said:
Are cattle not a commodity guys? I'd say he is refering to more ownership, or more integration like his Cargill cousins.

Econ said:
It is the concentration game.

Watch out for 'regional FMD free' trading zones...the door that opens the trade with SA...world's lowest cost producers and largest supply of cattle.

What is your view of this quote, pointrider?

Not sure how invested Tyson is in South America- but Cargil is getting to the point where they almost own Brazil....
 

pointrider

Well-known member
Econ, RobertMac, I think Brad S is right. I believe Dick Bond is talking about being the lowest cost producer, and that probably involves more South American beef.

I look for them to do things asap, especially since they have joined the Standard and Poors 500 (Consumer Staples group) index. They did that for several reasons. They want to benchmark themselves against the other members of the index. "We are a large company like them. We should be able to match or beat them in growth and profitability. We must look at what these other food companies et al in our group are doing, or we may find ourselves the target of a hostile takeover some day."

They also want to use the S&P 500 index as an excuse for doing what they do. "We have no choice. Look what our competitors are doing." In a way, they are right. It's not just getting the raw product at a lower price. It's also consolidating and upgrading plants to increase plant and machine efficiency and things like that in order to lower processing costs. They will also work on marketing costs.

Aside from the S&P 500 thing, they are also very aware of the competition they face on a daily basis from Cargill et al. They must compete in their specific industry in addition to wanting to look good in the 500. Many of their concerns for the present and the future are real. They must do something asap because of the 500 and the competition in the packing industry.

They want to be where they are (in the 500, etc.), and they will do everything they can to make it work the way it needs to work for them. I see the 500 as a way to force themselves to make things happen. By the way, have you noticed that their stock price is going up? How can that be if they are losing money? Ratios being worked on. Investors having faith in the future. Etc. Maybe some folks saw the stock as a real bargain looking long term. How do you see it?
 

RobertMac

Well-known member
Do you think Tyson's connection with Wal-mart has anything to do with their rise in prominence in the food industry? Doesn't hurt to be supplying the world's largest retailer!

Do you think Tyson's and Cargill's desire to be the first to get their hands on the cheap Brazilian cattle will threaten the USA(North American) herd with FMD?
 

Hanta Yo

Well-known member
Econ101 said:
commodities are products that usually have low margins because of lack of product differentiation and many suppliers/buyers--ie a competitive market. The money is made in large volume, not large margins.


Like what WalMart sells :mad: :!:
 

pointrider

Well-known member
RobertMac, before I get into the Wal-Mart thing, there is one thing I forgot to say in my last post. That is, a company dealing in commodities, as a rule, has more opportunity to affect the cost of a commodity being sold than the selling price. There are many ways to affect the cost, and that is why I believe Tyson will concentrate on that end. They have to do something fast, and playing games to try and influence commodity selling prices won't get it done.

Now, besides the fact that they are both headquartered in Northwest Arkansas which may carry some "neighbor and good friend" factors into the relationship, I believe that a company like Wal-Mart which carries so many different items from so many different suppliers is always looking for a way to minimize the number of suppliers they have to deal with. This reduces things like the number of payable entries that have to be made, the number of checks cut, the number of electronic transfers made and the number of people their buyers have to talk to (thus, reducing the number of buyers on the payroll).

Tyson is a large company with a large offering. Just the kind of supplier that Wal-Mart loves. Plus, Tyson has a good reputation for quality, and they do a lot of advertising of their own products. Once again, just the kind of supplier that Wal-Mart loves. The folks in Arkansas probably say it is a match made in heaven.

Large accounts (especially Wal-Mart) normally qualify for large pricing discounts. Wal-Mart is certainly in that category. A lot of suppliers look at Wal-Mart as the account that supplies a base amount of business for their plants, etc., and that covers the overhead. The smaller customers who have to pay more per unit are the ones who contribute the profit.

Econ likes to say "It's a concentration game." I say that the concentration is a normal progression in the competition game. Wal-Mart is competing. Tyson is competing. We are all competing, and according to the poll I did on this forum, 100% of the respondents said that competition is a good thing.

There will always be things to work on to keep people honest and keep the playing field level to the best of our ability, but the basic laws of capitalism and free enterprise support competition and concentration to a point, but they also support opportunity to do something better. Look at GM and Ford and Chrysler. When it got down to the "Big 3", did they rule the world after that? No! Now Toyota is destined to be #1, and the more hourly workers who accept the current buyout at GM (already over their goal), the quicker it is going to happen.

President Bush, in a speech that included the issue of American car manufacturers, said, "They are going to have to learn to compete." I guarantee that President Bush and the American people are not ready to throw in the towel on capitalism and free enterprise.
 

Sandhusker

Well-known member
Pointrider, "Look at GM and Ford and Chrysler. When it got down to the "Big 3", did they rule the world after that? No! Now Toyota is destined to be #1, and the more hourly workers who accept the current buyout at GM (already over their goal), the quicker it is going to happen."

I see some differences comparing auto maker's competition with Tyson and Cargill's. GM, Ford, and Chrysler were only the Big 3 here, not the world. Tyson and Cargill are the "Big 2" here AND the world.
 

pointrider

Well-known member
Sandhusker, I just received my copy of the Ranchers.net monthly e newsletter. Near the beginning is an ad from CRI Feeders, Guymon, OK. In their ad is a link, and that link leads to a list of 10 packing plants in shipping distance of their feedyard.

Those plants are: Tyson - Garden City, National - Dodge City, Excel - Dodge City, National - Liberal, Creekstone Farms - Arkansas City, Booker Pack - Booker, Swift - Dumas, Tyson - Amarillo, Excel - Friona and Excel - Plainview.

And that is just one feedyard.

There are choices other than Tyson and Cargill. Also, there are some big packers in South America.
 

Econ101

Well-known member
Pointrider:
Econ likes to say "It's a concentration game." I say that the concentration is a normal progression in the competition game. Wal-Mart is competing. Tyson is competing. We are all competing, and according to the poll I did on this forum, 100% of the respondents said that competition is a good thing.

There will always be things to work on to keep people honest and keep the playing field level to the best of our ability, but the basic laws of capitalism and free enterprise support competition and concentration to a point, but they also support opportunity to do something better. Look at GM and Ford and Chrysler. When it got down to the "Big 3", did they rule the world after that? No! Now Toyota is destined to be #1, and the more hourly workers who accept the current buyout at GM (already over their goal), the quicker it is going to happen.

President Bush, in a speech that included the issue of American car manufacturers, said, "They are going to have to learn to compete." I guarantee that President Bush and the American people are not ready to throw in the towel on capitalism and free enterprise.

Pointrider, I have always thought that this reasoning is the underlying reason that has allowed some of the abuses of market power to occur--or at least to be tolerated: the thought that we need to compete in a global economy.

The only problem with that reasoning is that in this environment we are brought down to the lowest common denominator when it comes to costs other than those expressed in price.

The more incompetent our government is when it comes to these non price items, the more our markets lose. Bse and international trade with Japan is one example.

Certain companies are benefitting from these circumstances and it just happens to be ones that have given a lot of money in political contributions.

Do we really want to be a Mexico? How has that system served them?

Free markets have to have rules to operate at their highest efficiency. Without them we eventually have an oligarchical economy where the highest efficiency is circumvented for the benefit of those in the oligarchs.

Get a copy of "The Robber Barons" and read what happened last time in our country's history. Pareto was right, and he learned it from history.
 

agman

Well-known member
RobertMac said:
Do you think Tyson's connection with Wal-mart has anything to do with their rise in prominence in the food industry? Doesn't hurt to be supplying the world's largest retailer!

Do you think Tyson's and Cargill's desire to be the first to get their hands on the cheap Brazilian cattle will threaten the USA(North American) herd with FMD?

Were they not the largest before supplying Wal-Mart? I believe they were. Your "cause & effect relationship seems to be misguided.
 
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