Protecting Livestock and Profits at Tyson
Animal agriculture is not only one of the biggest contributors to climate change, but also potentially one of its biggest victims.
With a market cap of over $28B and 2016 revenues of over 36B[1], Tyson foods is one of the largest meat producers in the world. Beef (38% of sales), and Chicken (30% of sales), comprise the largest portion of Tyson’s production. Especially at Tyson’s scale, changes in climate that make meat production more challenging pose serious risks to its core business.
How Climate Change can Affect Meat Production
Among other factors, climate change can negatively affect the availability and price of grain used to feed livestock, as well as animal health, growth, and reproduction.
Extreme heat events, (series of days that are unusually hot)[2], are a powerful outcome of climate change that harmfully influence both of these factors. For example in 2015, Tyson was forced to close a cattle plant in Iowa due to a drought that limited pastures for grazing[3]. Additionally, extreme heat has caused “heat stress” in livestock, leading to reduced feed intake, growth rate, embryo survival, and increased susceptibility to disease[4]. In extreme cases heat events can lead to death, such as a recent heat wave in San Joaquin Valley California that killed thousands of cows[5].
Extreme heat events are growing globally due to climate change. Fifteen of the sixteen warmest years ever recorded have occurred since 2000, and in the United States, unusually hot summer days and nights have become more common, nearly doubling on average since 20002. Additionally, extreme heat events are projected to become more common and more severe by the mid-21st century2.
How Tyson is Responding
To keep animals healthier and combat extreme heat in the short term, Tyson is investing in new programs and expanding best practices to its farmers. In 2017 Tyson rolled out a high-touch animal-welfare program, expanding video-auditing of plants and training animal well-being specialists and third party agencies to audit animal conditions on supplier farms[6]. Tyson also officially supports a system of housing standards for animals, encouraging farmers to employ best practices in climate control that could mitigate severe changes in temperature[7].
Tyson is not just a victim of climate change, it is also a contributor. In fact, animal agriculture is estimated to contribute as much as 18%[8] of global greenhouse-gas emissions. In 2011, Tyson estimates they contributed 5.2 million metric tons of of greenhouse gases to the atmosphere. In order to avoid exacerbating the issues it is creating for itself, Tyson is adopting long-term measures to curb its contributions to climate change at all steps in the supply chain. It is continuously streamlining its transportation footprint (eliminating 145 million trucking miles in 2012 in part by switching to rail), investing in sustainable packaging, creating a web-based energy efficiency management system, and more[9]. Tyson is also investing in meat-alternatives as a long-term bet on moving meat production away from animal-agriculture[10]. Tyson keeps track of efforts in annual sustainability report[11], and in May of 2017 Tyson announced a partnership with the World Resources Institute to develop outcome-based water conservation targets for its operations and the company’s supply chain[12].
What Other Courses of Action Tyson Should Consider
While Tyson’s long-term sustainability efforts are a step in the right direction, their short-term response to extreme heat events could be more robust. In 2016, Tyson sourced cattle from over 3,700 individual suppliers[13]. The company itself has rigorous standards for its owned and operated animal processing plants, but it does not in fact own or operate any feedlots. Cattle conditions in this first step of the supply chain – before they are shipped to Tyson – are somewhat influenced by Tyson. There are controls for nutrition, handling, and rearing of animals imposed via auditing from third parties and Tyson trained animal-welfare specialists, but support for climate-control and temperature regulation is not as robust. Tyson recommends that its suppliers follow animal-housing guidelines from national programs such as the BQA (Beef Quality Assurance) and the Livestock Marketing Association, but it does not take the extra steps to enforce these guidelines. For instance, constructing shelters with adequate windflow and sprinkler systems are important steps to preventing overheating[14]. Tyson should do a better job spreading and enforcing these best practices, as well as centralizing development of new, efficient technology to help farmers improve their own systems at the bottom of the chain. Efficiencies in housing technology will result in higher productivity from farmers, lower costs and increased supply for Tyson, as well as long-term reductions in greenhouse gas emissions.
Open Questions
As Tyson looks forward, two questions may have outsize impacts on their strategies to handle climate change. First, how dramatically will extreme heat events increase in the near-term? Predictions offer rough estimations, but not without a degree of uncertainty. Second and perhaps more critically, will Tyson’s investments in plant-based meat become cost-effective enough to change consumer behavior? How will this change the demand for animal-based meat?
- [800 Words]
[1] Tyson Foods, inc. “Form 10-K 2016.” Web. 11 Nov. 2017.
[2] Environmental Protection Agency, and Center for Disease Control. “Climate Change and Extreme Heat.” Oct. 2016, www.epa.gov/sites/production/files/2016-10/documents/extreme-heat-guidebook.pdf.
[3] Soderlin, Barbara. “Denison, Iowa, Tyson Foods Beef Plant a Casualty of Too Few Cattle.” Omaha World-Herald, 20 Aug. 2015.
[4] Mapham, and Vorster. “Heat Stress in Cattle.” pdfs.semanticscholar.org/1682/5abed07858a10c2f88525ba2638ba4d1f9a8.pdf.
[5] Associated Press. Thousands of Cows Die in California Heat Wave; Disposing Them Becomes a Problem. Los Angeles Times, 8 July 2017, www.latimes.com/local/lanow/la-me-cattle-deaths-20170708-story.html.
[6] “Tyson Foods Rolls Out High Tech High Touch Animal Welfare Program.” Tyson Media Releases, Tyson Foods, 21 June 2017, www.tysonfoods.com/media/news-releases/2017/06/tyson-foods-rolls-out-high-tech-high-touch-animal-welfare-program.
[7] “Animal Housing.” Tyson Foods, www.tysonfoods.com/responsible-food/animal-well-being/animal-housing.
[8] FAO, 2006. Livestock’s Long Shadow: Environmental Issues and Options. Food and Agriculture Organization of the United Nations.
[9] “SUSTAINABILITY REPORT.” Tyson Foods: Transparency, www.tysonsustainability.com/2012/section-4/4_5.
[10] Strom, Stephanie. “Tyson Foods, A Meat Leader, Invests in Protein Alternatives.” New York Times, 10 Oct. 2016.
[11] “Tyson Foods: Transparency.” Tyson Foods: Transparency, www.tysonsustainability.com/.
[12] “Tyson Foods Teams with World Resources Institute on Industry Leading Environmental Goals for Its Supply Chain.” ir.tyson.com/investor-relations/news-releases/news-releases-details/2017/Tyson-Foods-Teams-with-World-Resources-Institute-on-Industry-Leading-Environmental-Goals-for-its-Supply-Chain/default.aspx.
[13] Tyson Foods: Transparency: About Tyson, www.tysonsustainability.com/about-tyson-foods.
[14]“Caring for Animals during Extreme Heat.” Agriculture Victoria, Department of Economic Development, Jobs, Transport and Resources, 24 Oct. 2017, agriculture.vic.gov.au/agriculture/animal-health-and-welfare/animal-health/animals-in-hot-conditions/caring-for-animals-during-extreme-heat.
I share your curiosity in your final remarks, as I am also quite curious about how plant-based meat from Tyson might eventually alter consumer behavior and longterm meat demand. Although it is exciting and encouraging that behemoths such as Tyson are taking steps to “decarbonise” their business, I wonder how aggressively the company is actually pursuing and fostering relationships like the one with Beyond Meats. My instinct is to think that majority of these efforts are a form of greenwashing, and that they will never reach any scale of significance (I hope I’m wrong). Still, I don’t discount the importance of their efforts. Getting “Beyond Meats” name out there, and allowing them to gain brand momentum might not be of huge importance to Tyson, but it could still be big for the meatless industry.
Thanks for your post on this topic. I think the question you posed in your last paragraph (will Tyson’s investments in plant-based meat become cost-effective enough to change consumer behavior?) is a really interesting one, because it calls into question the role of supply vs. demand. I think that in the coming years, plant-based meat will become a larger portion of consumers’ diets, regardless of whether Tyson makes the investment to change its supply chain. In other words, I don’t believe it will be Tyson that will ultimately change consumer behavior. The market for plant-based meat is still very much demand driven, and growing (see the link below). The other consideration for Tyson will be the consistency of its brand and customer promise. I wonder whether consumers of meat alternatives will want to buy from Tyson, one of the largest animal meat producers in the world. Additionally, I question the signal that entering this meat alternatives market sends to Tyson’s investors – will this be signaling an admittance that Tyson’s current business model is in trouble?
https://plantbasedfoods.org/u-s-meat-substitutes-market-to-grow-experts-find/
Agree with your ending inquiries and I also wonder how Tyson can use their new focus into meat-alternatives and animal-wellness as a strong competitive advantage. I imagine this is an issue that all of their competitors are facing, so it is critical that Tyson does this well and quickly. I think this is also in line with where we are seeing consumer behaviors trending. Tyson can take advantage of that and really find the right channels to market these changes to their consumers. Sustainable efforts like these take time and require large investments in technology. It looks like Tyson is doing a pretty good job of streamlining their processes to include these changes as well as drive lower costs and higher utilization from farmers.
I agree that the plant based alternatives need to be cost effective but it also needs to be considered and accepted as an alternative by both perception and taste. Often times its easier in group situations to go with what is offered or what everyone else is doing which is likely (in the short term) to be the meat based option. It would be beneficial if Tyson educated its consumers on the meatless options that they are offering and the benefits it has on the environment.
Longer term Tyson doesn’t want consumer preferences to change so much that their own revenue starts to decrease for meatless alternatives. So it’s important to find the right balance of meat and meatless options for its wide variety of consumers.
A thoughtful read. While Tyson has made great strides in covering its own “carbon footprint” over the past five years, I think they now need to critically focus on their upstream suppliers and down stream customers. Instead of recommending/monitoring supplier best practices, they should have enforced guidelines and standard targets that all suppliers need to abide by in order to sell cattle to Tyson. Given Tyson’s scale, buying power in the market, and fragmented supplier base, I think they have the leverage to enforce some of these capital intensive initiatives. Additionally, Tyson should focus on the environmental-conscious practices of their meat purchasers (wholesalers/retailers). Again leveraging their scale could instigate major changes. Despite all of Tyson’s great work, climate change prevention can only be a reality if eco-friendly measures are adopted across the entire supply chain.
Really interesting read. Some of the interventions you lay out make me really optimistic in this industry in particular. When I was in consulting, I spent a good amount of time across multiple projects working at the largest processed meat manufacturer in Canada and we looked at Tyson as an analog on a lot of these issues. What makes me optimistic is the alignment between what needs to happen what consumers are saying they want in their meat products. In the research we did, we learned – unsurprisingly – that consumers want a more natural, simpler, healthier product. What was interesting was that they often saw animal treatment designations, such as some of the ones you mentioned, as leading indicators for these attributes (even if they aren’t in practice). The move to plant-based protein is also a win-win: mitigating operational challenges while giving consumers what they want. Of course there will still be mismatches of supply and demand along the way, but exciting that both trends are moving in the same direction.
In the spirit of “protecting the factory,” Tyson’s response to climate change-induced challenges aims to provide its farming partners (upstream on the supply chain) with the resources needed to generate sufficient supply of meat. While I agree that Tyson could enhance its short-term efforts, I’m wondering how much leverage Tyson has to enforce these behaviors. Said differently, what mechanisms could they use to further incentivize farmers to stick to the animal-housing guidelines from BQA and LMA? Additionally, with regard to plant-based meat, it seems likely that climate change will also create obstacles on that front. As explained in the link below, while rising temperatures may lead to faster plant growth, it could inadvertently reduce production / output because soil may not be able to supply nutrients to plants at adequate rates (e.g. water evaporating too quickly).
http://nca2014.globalchange.gov/report/sectors/agriculture
Very thoughtful read. Although the shift to focus more on plant based meat is challenging being a new industry, it aligns with the slowing demand fro meat in the US, which for local suppliers could provide a way out of livestock. In other countries however, the demand for meat, specially chicken, is on the rise. In Egypt, a border line middle class economy, the consumption of more calories is very consistent with income growth (95% growth expected by 2050). It would be interesting to see how global demand for meat will affect producers in USA, and whether this will drive change in those numbers by altering consumer behaviors in order to realize a sizable effect on the global climate.
“Studies Show Link Between Meat and Climate Change.” Climate Central, 20 Apr. 2016, http://www.climatecentral.org/news/studies-link-red-meat-and-climate-change-20264.