Dive Brief:
- Tyson Foods lowered its annual profit outlook as the meat processing giant acknowledged that high beef prices are unlikely to come down anytime soon.
- The Arkansas-based company's beef segment reported an operating loss of $138 million, according to third-quarter earnings released Monday. Sales volumes in the segment declined 15.9% and prices rose 12.1%.
- Chief Financial Officer Curt Calaway said in an earnings call that "industry conditions are challenged." Tyson’s efforts to close beef plants and optimize its network have not been enough to offset the drag on profits.
Dive Insight:
Beef supplies continue to remain tight as ranchers grapple with a historic livestock shortage that's sent prices to record highs.
In an effort to boost supply, the Trump administration announced last week it would lift a ban on cattle from Mexico Tyson CEO Donnie King said on Monday the move only provides the "potential for some level of improvement in 2027 and beyond."
"To be clear, the reopening of the Mexican border will not solve the entire gap of beef losses we are currently seeing," he said. "We are not waiting passively for the cattle cycle to turn, and we continue to focus on improving the variables within our control."
Consumers have shifted away from beef as prices continue to soar, with the average retail beef price reaching an all-time high of $9.64 in April. Total meat department sales declined 2.3% in June, according to Circana data, as higher costs pressured consumers already sensitive to grocery inflation.
The dynamic is leading to a significant earnings drag for meat companies like Tyson, which reported essentially flat sales despite strong results in other categories such as chicken and pork. Tyson narrowed full year sales growth guidance to 2.5% to 3.5% year-over-year with the beef segment expected to report up to a $650 million operating income loss.
Tyson executives also noted that cattle supplies are recovering more slowly than they did following lows reached in 2014. Many of the cattle being brought in from Mexico are feeder cattle, meaning it will take at least six months to enter the food supply.
Cattle shortages have prompted many meat processors to close plants or cut down production to generate savings and boost efficiencies. In June, world's largest meat company JBS closed two beef plants as it grappled with lower profits.
Tyson last fall closed one of its largest beef processing plants in Nebraska and reduced shifts at another facility in Texas.
"Beef hasn't performed the way we expected, and we're not pretending otherwise," King said. "But we're controlling what we can control there, and we're not waiting passively for the cycle to turn."
