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What Does the Wall Street Think of Tyson?

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Econ101

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Investors Buy Puts on Tyson Foods

And the Russell 2000 Index ETF

By MOHAMMED HADI

February 23, 2006

Wall Street Journal



Owners of Tyson Foods Inc. shares have had a lot to worry about lately.



This includes weakness in the company's beef business, slumping international poultry sales and the combined impact of mad-cow disease and bird flu on business in the U.S. and abroad.



In a nutshell: Disappointing quarterly earnings and a hazy outlook have knocked the stock down about 23% in about three months.



Yesterday, options traders gave every indication that they think things could get worse.



Trading in puts on Tyson was remarkably heavy, even by recent standards, with the focus of activity in the April 12.50 puts. These traded 15,190 contracts, where 7,786 were previously outstanding, and rose 20 cents, to 35 cents, on the International Securities Exchange. This as the stock slipped 13 cents to $14.21.



"Today's put volume is the biggest option volume we have seen going back at least one year," said Stacey Briere, options strategist at Susquehanna Financial Group, "and investors are buying the majority once again."



The trading followed comments made late Tuesday in which the company's chief executive, John Tyson, told the Consumer Analysts Group of New York that the current quarter is "the toughest one I've seen."



Yesterday morning, Wachovia Securities analyst Jonathan Feeney downgraded his rating on the stock to underperform, citing "deteriorating earnings visibility."



All told, more than 21,500 puts on Tyson traded Wednesday. Implied volatility in short-term options jumped to 32% from 29%, according to Track Data. By comparison, on a typical day in January, about 2,600 puts changed hands.



Meanwhile, with the Russell 2000 small-stock index returning to within striking distance of its all time high, puts on iShares Russell 2000 Index Fund traded more heavily than usual.



With the exchange-traded fund up $0.49 at $72.82 -- just below a record closing high of $73.10 -- trading was heaviest in the March 70 puts, but the April 70 puts also traded busily.



About 19,415 of these changed hands compared with 5,580 previously outstanding, and they fell 50 cents, to 85 cents, on the Chicago Board Options Exchange.



All told, more than 155,000 puts on the ETF changed hands Wednesday.



The popularity of options on the Russell 2000 Index Fund shouldn't come as much of a surprise given Russell Investment Group's announcement last week that $3.8 trillion in assets are now benchmarked against its stock indexes -- including the broad Russell 3000, the large-cap Russell 1000, and the best known small-cap Russell 2000.





wsj.com
 

Tam

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Econ could you tell us just what this post is saying in your own words Please. As I thought you said Tyson controls the US and Canadian Meat processing industries and that they have made a killing off the BSE issue but if that is true why are shareholders selling their stocks don't you think that is strange.

What is with these kinds of statements can you tell us just what they mean
1. Owners of Tyson Foods Inc. shares have had a lot to worry about lately.
2. This includes weakness in the company's beef business,
3. slumping international poultry sales
4. the combined impact of mad-cow disease and bird flu on business in the U.S. and abroad.
5. Disappointing quarterly earnings and a hazy outlook have knocked the stock down about 23% in about three months.
6. options traders gave every indication that they think things could get worse.
7. Trading in puts on Tyson was remarkably heavy, even by recent standards,
8. This as the stock slipped 13 cents to $14.21.
9. The trading followed comments made late Tuesday in which the company's chief executive, John Tyson, told the Consumer Analysts Group of New York that the current quarter is "the toughest one I've seen."
10. downgraded his rating on the stock to underperform, citing "deteriorating earnings visibility."
11. About 19,415 of these changed hands compared with 5,580 previously outstanding, and they fell 50 cents, to 85 cents, on the Chicago Board Options Exchange.
Now if Tyson has been walking away with all the money due to BSE that you and others claim they have then why again are their shareholders selling and why are their shared dropping in value. This just doesn't make sence to me.
 

Econ101

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Tam said:
Econ could you tell us just what this post is saying in your own words Please. As I thought you said Tyson controls the US and Canadian Meat processing industries and that they have made a killing off the BSE issue but if that is true why are shareholders selling their stocks don't you think that is strange.

What is with these kinds of statements can you tell us just what they mean
1. Owners of Tyson Foods Inc. shares have had a lot to worry about lately.
2. This includes weakness in the company's beef business,
3. slumping international poultry sales
4. the combined impact of mad-cow disease and bird flu on business in the U.S. and abroad.
5. Disappointing quarterly earnings and a hazy outlook have knocked the stock down about 23% in about three months.
6. options traders gave every indication that they think things could get worse.
7. Trading in puts on Tyson was remarkably heavy, even by recent standards,
8. This as the stock slipped 13 cents to $14.21.
9. The trading followed comments made late Tuesday in which the company's chief executive, John Tyson, told the Consumer Analysts Group of New York that the current quarter is "the toughest one I've seen."
10. downgraded his rating on the stock to underperform, citing "deteriorating earnings visibility."
11. About 19,415 of these changed hands compared with 5,580 previously outstanding, and they fell 50 cents, to 85 cents, on the Chicago Board Options Exchange.
Now if Tyson has been walking away with all the money due to BSE that you and others claim they have then why again are their shareholders selling and why are their shared dropping in value. This just doesn't make sence to me.

Tam, in the market concentration game one company usually drives down the profits due to fierce competition. This fierce competition drives the profits out of the business sector and some of the businesses in the sector fold or get bought out by the big guys. When profits are driven out of the business the price or value of the smaller guys is way less than if the business sector had been making money. The big guys get to buy the little guys out cheaper or they run them out of business. During this phase it looks as if competition is working well with low margins in the business and only the most "efficient"" firms survive.

It is interesting to me that to get to this "efficiency" the firms in the meat packing business have hired cheap foreign labor to further reduce their costs below that of competitors. Tyson has been in the ringer for that strategy in both the U.S. and in Canada (do you need citations?) This leaves the little Mom and Pop or local butcher shops with tighter margins and competition from "cheap" labor. It puts them at a distinct disadvantage when it comes to surviving in this atmosphere.

Another "efficiency" that has been used by Tyson is their use of MBM and offal in their animal feed. Of course you know that this is the accepted cause Canada's BSE crisis by almost all nations looking into the subject. I don't want to get into an argument with anyone on this issue as to feed being the causative agent in the spread of bse, because the accepted belief that it is the causative agent has had a huge impact in itself. If it is (I don't know but would lean that way heavily--let rkaiser and bse, flounder, and others sort that one out), then Tyson has been the principle agent in spreading the TSEs around North America just to win this competition game that SH has touted and that little packing plants cannot particiapate in. Tyson can still use MBM in poultry feed which has cattle implications since many, many poultry farmers also have cows on the same farm as their poultry barns and cross contamination of feed was NEVER calculated as a cost by these poultry farmers. Right now Tysons can and has put a lot of things in their poultry feed that makes the resulting manure more of an environmental hazard (do you want citatations?) for the poultry farmers who have no control over it.

Another way Tyson "wins" in the competition game is by "swinging" the beef market and making profits off of their poultry operations when markets naturally correct this phenomena when seeking the supply/demand equilibrium. This is one of my principle allegations I have been making and the financial results as well as price of these products after the Pickett manipulation proven this point to be true. All of the increase in poultry prices goes to the integrator(Tyson) unlike the increase in beef prices, which goes to the cattleman. Due to the industrial structure in poultry, the poultry farmers can be held down their average variable costs, which means all profits go to the company, not the farmer. They have a rather ingenious way of accomplishing this in poultry and it breaks all of the economic protections provided in the Packers and Stockyards Act of 1921. GIPSA is just too incompetent, corrupt, or shackled by those getting campaign contributions and revolving door benefits to change the situation for the farmers. The cost of poultry for Tyson and the other companies is therefore artificially lower than the normal market equilibrium if these frauds were not being done. It allows poultry to outcompete beef on price more than if market power was not being exerted.

Profits from poultry (or pork) are allowed to be used in the beef sector for capital improvements or for purchasing more market power. It is not because Tyson is the "best" competitor that they are taking over the meats markets, it is because they are the best at getting away with breaking the laws and running their business on the edge of the envelope. Not to worry, they have people like you who do not see the whole picture to take up their cause and of defend them in these practices all the while running out the people who compete with them for your business.

All of these factors do not happen at the same time. They rotate between the sectors. The arguments rotate as well. That is how it is easy to fool some people who do not understand it. Time periods are important in explaining the phase. Arguments held in one time period for one sector do not hold for another sector in the same timwh e period. If you look only at one sector, you miss the complete picture of what is happening and the potential damage to the markets and producers.

Will the beef sector go the same route as the poultry sector? Undoubtedly. More market power tricks will be played on the cattleman and Tyson will claim that the increase in retail dollar it gets is due to the further processing it does to make the product sell better. Some of this may be true, but the profits in the beef business will slowly be sucked away from the producers as it has been done in poultry. Rod has great reason to be concerned about this business being profitable for his kids. You only have to look at what has and is happening in poultry to see how it will happen.

Do I rant and rave about ALL packers? NO. There is one that is using the courts and defunct regulatory agencies in the U.S. to continue their market frauds and to further concentrate the industry until they control it all. You can guess who it is. They are the most successful at getting away with the above frauds.

Now Tam, you can argue all your little points above and disect every little sentence in my posts if you want. You can try to make me "prove" every little sentence and every little word. It only provides a disservice to those who want to see what is happening in the whole picture. Until you see the whole picture and understand it, you just won't get it before it is too late.

The article I posted shows that some investors in Tyson are a little apprehensive about the prospects Tyson stock in the future. Maybe they think some of these frauds are catching up to Tyson. Maybe they see the market concentration game and think the dynamics are of the frauds is about to change. Maybe they know something you do not. They usually do.
 
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As usual, Conman presents all kinds of statements and theories with nothing to support either.

The obvious facts are that Tyson is reporting losses and closing plants due to those losses. The facts trump conspiracy theories every time.

To suggest that Tyson would have any incentive to lie to potential investors by reporting losses if they were actually making profits is the epitomy of ignorance. Then you would also have to explain why they didn't report losses all the times since it's obvious they report profits too. LOL! Must really suck to try to justify such stupidity.

Tyson is "A MARKET", Tyson is not "THE MARKET" and that fact simply blows huge holes in your market manipulation conspiracy theory. If Tyson drops the price they are willing to pay for fat cattle due to the cattle they have procured, that leaves Excel and Swift with that many less cattle to buy. An undeniable fact!


~SH~
 

Sandhusker

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SH, "If Tyson drops the price they are willing to pay for fat cattle due to the cattle they have procured, that leaves Excel and Swift with that many less cattle to buy. An undeniable fact!"

Wouldn't Tyson lowering their prices also allow Excel and Swift to lower their prices?
 

Econ101

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~SH~ said:
As usual, Conman presents all kinds of statements and theories with nothing to support either.

The obvious facts are that Tyson is reporting losses and closing plants due to those losses. The facts trump conspiracy theories every time.

To suggest that Tyson would have any incentive to lie to potential investors by reporting losses if they were actually making profits is the epitomy of ignorance. Then you would also have to explain why they didn't report losses all the times since it's obvious they report profits too. LOL! Must really suck to try to justify such stupidity.

Tyson is "A MARKET", Tyson is not "THE MARKET" and that fact simply blows huge holes in your market manipulation conspiracy theory. If Tyson drops the price they are willing to pay for fat cattle due to the cattle they have procured, that leaves Excel and Swift with that many less cattle to buy. An undeniable fact!


~SH~

SH, is Tyson out trying to get additional capital right now? Is the family selling Tyson shares? If not, what investors are you talking about? What does it matter?

What kind of garbely goop are you talking about here, SH? What questions are you answering?
 
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Sandbag: "Wouldn't Tyson lowering their prices also allow Excel and Swift to lower their prices?"

How could it when Excel and Swift are in competition for the remaining cattle?

You blamers will never understand the realities of the packing industry.



~SH~
 

Econ101

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~SH~ said:
Sandbag: "Wouldn't Tyson lowering their prices also allow Excel and Swift to lower their prices?"

How could it when Excel and Swift are in competition for the remaining cattle?

You blamers will never understand the realities of the packing industry.



~SH~

Tyson was taken into court alone. If they wanted to use your arguments as a defense, they could have. The arguments that Tyson had did not fly with the jury, they only flew with an 11th circuit that increasingly has its own credibilty problems. Judges, whether appointed by republicans or democrats, have a responsibility to uphold the laws of the land. The 11th circuit is into gutting them.
 

Sandhusker

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~SH~ said:
Sandbag: "Wouldn't Tyson lowering their prices also allow Excel and Swift to lower their prices?"

How could it when Excel and Swift are in competition for the remaining cattle?

You blamers will never understand the realities of the packing industry.



~SH~

Then exlain the comment you've made ad nauseum "lowering their prices as their needs are met". How can they lower their prices if Swift and Excel are competing for the remaining cattle? Does this economic model only work when you want it to?
 

Jason

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Then exlain the comment you've made ad nauseum "lowering their prices as their needs are met". How can they lower their prices if Swift and Excel are competing for the remaining cattle? Does this economic model only work when you want it to?

Gee if Tyson lowers their price (or doesn't bid at all) because they have their needs met, does that force their competiton to stop buying if they have not got their needs met?

Excel and Swift will still have to offer a price the feeder will sell at, or they won't be killing.

When supplies of finished cattle are tight the feeders have more power than the packers. When supplies are abundant the packers can be more picky.
 

Econ101

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Jason said:
Then exlain the comment you've made ad nauseum "lowering their prices as their needs are met". How can they lower their prices if Swift and Excel are competing for the remaining cattle? Does this economic model only work when you want it to?

Gee if Tyson lowers their price (or doesn't bid at all) because they have their needs met, does that force their competiton to stop buying if they have not got their needs met?

Excel and Swift will still have to offer a price the feeder will sell at, or they won't be killing.

When supplies of finished cattle are tight the feeders have more power than the packers. When supplies are abundant the packers can be more picky.

Jason, your arguments would be compelling and accurate except for one small problem. The packers achieved a strategic advantage of discriminating against the cash market that they would not have achieved if there were no marketing agreements that were tied to the cash price and they had no market power. That is why this prohibition is spelled out in the Packers and Stockyards Act. It prevents the type of market manipulation and fraud in the Pickett case.
 

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Jason said:
Then exlain the comment you've made ad nauseum "lowering their prices as their needs are met". How can they lower their prices if Swift and Excel are competing for the remaining cattle? Does this economic model only work when you want it to?

Gee if Tyson lowers their price (or doesn't bid at all) because they have their needs met, does that force their competiton to stop buying if they have not got their needs met?

Excel and Swift will still have to offer a price the feeder will sell at, or they won't be killing.

When supplies of finished cattle are tight the feeders have more power than the packers. When supplies are abundant the packers can be more picky.

You missed it, Jason. If Tyson, Excel, and Swift are in such a fight over cattle, Tyson wouldn't be able to lower their bids "as their needs are met" because of the "competition" between the others - they wouldn't get any more bought! SH didn't think that one thru very good - and neither did you.
 

Jason

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If Swift and Excel keep Tyson from getting the cattle they need, Tyson will have to up its price. Think about it. Their needs wouldn't be met.
 

Econ101

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Jason said:
If Swift and Excel keep Tyson from getting the cattle they need, Tyson will have to up its price. Think about it. Their needs wouldn't be met.

If they all agreed there is only so much cattle out there and all implicitly agreed to not pay as much, they could lower the price by not actively bidding on the supply. Competition is not necessarily a given, especially when there is this much industry concentration. OCM stated that in his experience they do not actively bid against each other and know what the others are paying for the cattle. Why do you think competition is a given Jason? Do you have any proof of this or at least as much proof as OCM has brought to the forum?
 

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Jason said:
If Swift and Excel keep Tyson from getting the cattle they need, Tyson will have to up its price. Think about it. Their needs wouldn't be met.

It looks to me that you don't buy SH's Pickett arguement about Tyson lowering their prices as their needs were met, either. Be careful, he might take away your "SH's Packer Backer Club" membership button!
 

agman

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Econ101 said:
Jason said:
If Swift and Excel keep Tyson from getting the cattle they need, Tyson will have to up its price. Think about it. Their needs wouldn't be met.

If they all agreed there is only so much cattle out there and all implicitly agreed to not pay as much, they could lower the price by not actively bidding on the supply. Competition is not necessarily a given, especially when there is this much industry concentration. OCM stated that in his experience they do not actively bid against each other and know what the others are paying for the cattle. Why do you think competition is a given Jason? Do you have any proof of this or at least as much proof as OCM has brought to the forum?

OCM stated his opinion from a narrow observation. The fact is they do bid against each other. Because of communications the "KNOW" works both ways. They know when other packers are not bidding just as producers do and they also know the minute one packer, small or large, makes a move just as producers do. Such is the world of communications we have today.

Due to packer and producer logistics is the activity the same in every and all locations - NO? However, if the bid in one area is insufficient to cover the transportation differential to another packers plants that packer will quickly jump in and correct the deficiency. Arbitrage is constant in the marketplace as it should be. Anyone who is really attuned to the market knows this.
 

agman

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Econ101 said:
Jason said:
If Swift and Excel keep Tyson from getting the cattle they need, Tyson will have to up its price. Think about it. Their needs wouldn't be met.

If they all agreed there is only so much cattle out there and all implicitly agreed to not pay as much, they could lower the price by not actively bidding on the supply. Competition is not necessarily a given, especially when there is this much industry concentration. OCM stated that in his experience they do not actively bid against each other and know what the others are paying for the cattle. Why do you think competition is a given Jason? Do you have any proof of this or at least as much proof as OCM has brought to the forum?

If only your comment... "If they all agreed there is only so much cattle out there and all implicitly agreed to not pay as much, they could lower the price by not actively bidding on the supply" had any merit. "IF" is a big word. IF you ever had any real proof you might provide it rather then make endless assumptions which you never support. Only IF you had any real knowledge you would not trap yourself in such foolish statements.
 

Econ101

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agman said:
Econ101 said:
Jason said:
If Swift and Excel keep Tyson from getting the cattle they need, Tyson will have to up its price. Think about it. Their needs wouldn't be met.

If they all agreed there is only so much cattle out there and all implicitly agreed to not pay as much, they could lower the price by not actively bidding on the supply. Competition is not necessarily a given, especially when there is this much industry concentration. OCM stated that in his experience they do not actively bid against each other and know what the others are paying for the cattle. Why do you think competition is a given Jason? Do you have any proof of this or at least as much proof as OCM has brought to the forum?

If only your comment... "If they all agreed there is only so much cattle out there and all implicitly agreed to not pay as much, they could lower the price by not actively bidding on the supply" had any merit. "IF" is a big word. IF you ever had any real proof you might provide it rather then make endless assumptions which you never support. Only IF you had any real knowledge you would not trap yourself in such foolish statements.

Agman, I don't need to prove it to say that it is a possibility. There should be no assumption that it is true when we don't have competency in the regulatory agencies that oversee them. You want everyone to make that assumption. I think it is ill advised.

The defendants in the Pickett case could have convinced the jury if this was their defense. They failed to persuade them. Maybe it was a losing strategy and they knew it. Who knows. It doesn't even really matter. Maybe Tyson was scared of that "if". Why don't you ask them?

In the recent case the Supreme Court handed back to the 11th circuit, Tyson had the opportunity to show in court where the particular poultry operation they were trying to turn around was losing $230 k. They did not present that evidence and yet want to claim it as an excuse for the actions of their manager in press releases. This was the same thing that happened in the Pickett case with the marketing agreements and their use as a weapon in the price depression. They didn't convince the jury of that so they thought they would just convince the judges with it. It is a sorry way for the 11th circuit to run a court system.
 
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Sandbag: "How can they lower their prices if Swift and Excel are competing for the remaining cattle?"

Sandbag: "If Tyson, Excel, and Swift are in such a fight over cattle, Tyson wouldn't be able to lower their bids "as their needs are met" because of the "competition" between the others - they wouldn't get any more bought! SH didn't think that one thru very good - and neither did you."


Tyson only lowered their prices in the cash market AFTER THEIR NEEDS WERE FULFILLED IN THEIR FORMULA MARKET.

Sometimes I sit here in total amazement that you were hired to lend money to others.

How many empty trees do your dogs have to bark up before you finally realize that your dogs won't hunt?


~SH~
 

Sandhusker

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~SH~ said:
Sandbag: "How can they lower their prices if Swift and Excel are competing for the remaining cattle?"

Sandbag: "If Tyson, Excel, and Swift are in such a fight over cattle, Tyson wouldn't be able to lower their bids "as their needs are met" because of the "competition" between the others - they wouldn't get any more bought! SH didn't think that one thru very good - and neither did you."


Tyson only lowered their prices in the cash market AFTER THEIR NEEDS WERE FULFILLED IN THEIR FORMULA MARKET.

Sometimes I sit here in total amazement that you were hired to lend money to others.

How many empty trees do your dogs have to bark up before you finally realize that your dogs won't hunt?


~SH~

"After their needs were fulfilled in their formula market"? That would mean they didn't buy any in the cash market, now wouldn't it?
 

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