Tyson Foods Inc. reported that its chicken segment lost $46 million in the second quarter of fiscal year 2009, which ended March 28, 2009. There was a distinct positive note for the company’s broiler operations, however.

"Our chicken segment has been profitable since the end of February, and I am pleased with the consistent progress we are making," said Leland Tollett, interim president and CEO of Tyson Foods. "We have improved our operational efficiencies, our product mix, and we are benefiting from lower grain costs and more favorable chicken prices."

Donnie Smith, senior group vice president of poultry and prepared foods, said that if not for losses on grain hedging in the second quarter, Tyson’s chicken operation would have been profitable. Smith attributed $63 million in additional costs to grain hedging losses for the chicken operations in the second quarter.

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Tyson reported that it was able to reduce its finished goods inventory by 150 million pounds in the second quarter, and most of this reduction came in chicken products. Earlier this year, Tyson reported that it reduced chick placements by 5% in December 2008 to help the company reduce its frozen chicken inventory. In a conference call held in February the company said that these placement cuts would be maintained until inventories were reduced to normal levels and customer demand warranted an increase in volume. During the May 4 conference call, the company said that it had not increased chick placements, even though finished goods inventories have been reduced to what were described as “normal” levels.

“We will add back when our market demands it and not before,” Tollett said. “We will not put chickens down on the come.”

The company as a whole lost $104 million in the second quarter. Tyson officials expressed some guarded optimism that operating margins for all of its businesses will continue to improve in the third and fourth quarters of this fiscal year. When asked if a return to normal profit margins in the chicken business would prompt Tyson to increase chick placements back to its pre-placement cut levels, Tollett said that the company would not add volume unless they think that they could maintain these profit margins unequivocally at the increased volume levels.