Tyson Foods 2009 Annual Report Download - page 4

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food processors, as well as to international markets. We sell allied products to pharmaceutical and technical products manufacturers,
as well as a limited number of live swine to pork processors.
Prepared Foods: Prepared Foods operations include manufacturing and marketing frozen and refrigerated food products, as well as
logistics operations to move products through the supply chain. Products include pepperoni, bacon, beef and pork pizza toppings,
pizza crusts, flour and corn tortilla products, appetizers, prepared meals, ethnic foods, soups, sauces, side dishes, meat dishes and
processed meats. Products are marketed domestically to food retailers, foodservice distributors, restaurant operators and
noncommercial foodservice establishments such as schools, hotel chains, healthcare facilities, the military and other food processors,
as well as to international markets.
RAW MATERIALS AND SOURCES OF SUPPLY
Chicken: The primary raw materials used in our chicken operations are corn and soybean meal used as feed and live chickens raised
primarily by independent contract growers. Our vertically-integrated chicken process begins with the grandparent breeder flocks and
ends with broilers for processing. Breeder flocks (i.e., grandparents) are raised to maturity in grandparent growing and laying farms
where fertile eggs are produced. Fertile eggs are incubated at the grandparent hatchery and produce pullets (i.e., parents). Pullets are
sent to breeder houses, and the resulting eggs are sent to our hatcheries. Once chicks have hatched, they are sent to broiler farms.
There, contract growers care for and raise the chicks according to our standards, with advice from our technical service personnel,
until the broilers reach the desired processing weight. Adult chickens are transported to processing plants, and finished products are
sent to distribution centers, then delivered to customers.
We operate our own feed mills to produce scientifically-formulated feeds. In fiscal 2009, corn and soybean meal were major
production costs, representing roughly 45% of our cost of growing a live chicken. In addition to feed ingredients to grow the
chickens, we use cooking ingredients, packaging materials and cryogenic agents. We believe our sources of supply for these materials
are adequate for our present needs, and we do not anticipate any difficulty in acquiring these materials in the future. While we
produce nearly all our inventory of breeder chickens and live broilers, from time-to-time we purchase live, ice-packed or deboned
chicken to meet production requirements.
Beef: The primary raw materials used in our beef operations are live cattle. We do not have facilities of our own to raise cattle but
have cattle buyers located throughout cattle producing areas who visit independent feed yards and buy live cattle on the open spot
market. These buyers are trained to select high quality animals, and we continually measure their performance. We also enter into
various risk-sharing and procurement arrangements with producers to secure a supply of livestock for our facilities. We believe the
sources of supply of live cattle are adequate for our present needs.
Pork: The primary raw materials used in our pork operations are live hogs. The majority of our live hog supply is obtained through
various procurement relationships with independent producers. We also employ buyers who purchase hogs on a daily basis, generally
a few days before the animals are processed. These buyers are trained to select high quality animals, and we continually measure their
performance. We believe the sources of supply of live hogs are adequate for our present needs. Additionally, we raise a number of
weanling swine to sell to independent finishers and supply a minimal amount of live swine for our own processing needs.
Prepared Foods: The primary raw materials used in our prepared foods operations are commodity based raw materials, including
chicken, beef, pork, corn, flour and vegetables. Some of these raw materials are provided by the Chicken, Beef and Pork segments,
while others may be purchased from numerous suppliers and manufacturers. We believe the sources of supply of raw materials are
adequate for our present needs.
SEASONAL DEMAND
Demand for chicken and beef products generally increases during the spring and summer months and generally decreases during the
winter months. Pork and prepared foods products generally experience increased demand during the winter months, primarily due to
the holiday season, while demand decreases during the spring and summer months.
CUSTOMERS
Wal-Mart Stores, Inc. accounted for 13.8% of our fiscal 2009 consolidated sales. Sales to Wal-Mart Stores, Inc. were included in the
Chicken, Beef, Pork and Prepared Foods segments. Any extended discontinuance of sales to this customer could, if not replaced, have
a material impact on our operations. No other single customer or customer group represents more than 10% of fiscal 2009
consolidated sales.