This is similar to what has been going on at the grocery store. Cattle futures prices are down this year, but I'll bet your cost per pound for a nice steak isn't.
Processing is a bottleneck: meatpacking and sawmills. Often when processing is a bottleneck the processors make a lot of money. If you are in refining and a big competitor is down for maintenance, the crack spread rises and you clean up.
Except in this case, covid is just screwing up processing plants: decreasing volumes and increasing costs. Here is what Tyson Foods said in the second quarter:
We are experiencing multiple challenges related to the pandemic. These challenges are anticipated to increase our operating costs and negatively impact our volumes for the remainder of fiscal 2020. Operationally, we have and expect to continue to face slowdowns and temporary idling of production facilities from team member shortages or choices we make to ensure operational safety. The lower levels of productivity and higher costs of production we have experienced will likely continue in the short term until the effects of COVID-19 diminish. Each of our segments has also experienced a shift in demand from foodservice to retail; however, the volume increases in retail have not been sufficient to offset the losses in foodservice and as a result, we expect decreases in volumes in the second half of fiscal 2020.This is relevant in thinking about our Oddball companies who own timber, for example: Keweenaw Land Association, Pardee Resources, and Coal Creek Company. (Be sure to also read one of our older pieces, The Problem With "Sum of the Parts".)
We will have more about this topic in upcoming Issues of the Newsletter. If you are curious about the Oddball Stocks Newsletter, you can find out more (including à la carte Issues). Also be sure to follow Nate Tobik and the Newsletter on Twitter.
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