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America has the fewest cattle in three (human) generations. The resulting higher beef prices would be a blessing for the meat industry, were it not for the fact that operating expenses have swarmed balance sheets like horn flies to a herd.
The latest to report on the phenomenon was Tyson Foods, which trimmed its outlook like a tenderloin on Thursday. Shares fell 7.3%, while rivals Smithfield Foods and JBS tumbled 1.6% and 3%, respectively.
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Unfortunate Misteaks
This story starts with the US cattle herd, which is at a 75-year low, according to the latest US Department of Agriculture data. The 28.5 million beef cows as of July 1 marked the lowest headcount since tracking began in 1971 and represented a 1% year-over-year decline. For consumers, the herd shortfall has pushed beef prices up 70% since 2020. But ranchers have little incentive to rebuild because high prices are the one thing helping them protect the other thing vanishing before their eyes: margins.
As America’s largest meatpacker, Tyson is in the crosshairs of the crisis. The company has said the operating margin of its beef segment was negative 4.3% in the first nine months of the year. Downsizing hasn’t closed the gap yet, and earnings remain under pressure:
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Tyson expects its beef segment to lose $625 million to $775 million in 2026, more than its previous estimate of $500 million to $650 million. Overall, the company slashed its annual income forecast to $1.85 billion to $2.05 billion, from the previous $2.1 billion to $2.3 billion.
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The Trump administration has attempted to lower beef prices, most recently agreeing to allow 300,000 metric tons of duty-free beef imports for 90 days from September 1, on the condition that it is sold at “25% below the market price.” But, as CNN reported, this only represents about 2% of domestic beef consumption.
Herd the News? Earlier this week, the US Department of Agriculture announced a series of federal initiatives it hopes will support herd growth and end a cyclical contraction that began in 2019. Among them is a mechanism allowing ranchers to insure the value of cattle retained for breeding for two years.
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