To say that the past two years have been challenging for American meat companies is an understatement. Just two years ago, Tyson Foods, the largest processor of fed beef in the industry, posted operating income for its beef segment of US$2.502 billion. The year before, it posted a record operating profit of US$3.240 billion. But the segment suffered a historic loss in fiscal 2024 and faces a similar loss in 2025.
Tyson Beef reported an operating loss of US$381 million for the year ended September 30. This went against a loss of US$91 million in fiscal 2023. This was despite the fact that sales of US$20.479 billion were up 1.6 per cent on 2023’s $19.325 billion and that its average selling price was up 4.4 per cent. Operating margin for 2024 was a negative 1.9 per cent, versus a negative 0.5 per cent in 2023.
Annual operating income decreased, primarily reflecting compressed spreads as expected, Tyson CFO Curt Calloway told analysts on November 12. Uncertainties remain, including the timing and pacing of meaningful herd rebuild intentions, he said. These market dynamics were reflected in Tyson’s range of outcomes for operating income for fiscal 2025, where it expects a loss of US$400 million to US$200 million. This reflects a similar level of profitability year-over-year at the midpoint, said Calloway. The 2024 loss far exceeded Tyson Beef’s previous largest-ever loss of US$244 million in fiscal 2006.
The reason for Tyson’s negative outlook is clear. It cited USDA projections that domestic beef production will decrease by about two per cent in 2025 versus 2024. Analysts forecast that the total U.S. cattle slaughter in 2024 is on track to be 1.3 million head lower than the 2023 total of 34.32 million head. The annual cow harvest will decline by approximately 1.028 million head from 2023’s total, says Andrew Gottschalk, HedgersEdge.com. This would imply that the reduction in the annual cow harvest would comprise 83 per cent of the reduction in this year’s total harvest. The balance belongs to steers and heifers, he says.
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Tyson Foods has closed several poultry processing plants in recent years, and has now added a beef plant to its closure list. Tyson says it expects to lay off 809 employees at its beef plant in Emporia, Kan., which is a beef and pork non-harvest facility. It announced in a letter to employees that it would cease all operations on February 14, 2025. Tyson officials reportedly told city officials that all Emporia operations would move to its Holcomb, Kan., beef facility.
Tyson Foods took over the operation of the Emporia plant in 2001 after buying Iowa Beef Packers (IBP). IBP had operated the plant as a slaughter and processing facility for many years. But it ended those operations in 2008. The plant had a daily slaughter capacity of 4,000 head.
As for the overall U.S. beef processing industry, I do not anticipate that any beef plants of any size will close in the coming year. But the reduced cattle numbers suggest that brand-new plants will struggle to buy cattle from established players. At least eight new plants are in the works, with an avowed slaughter capacity of more than 9,000 head per day. I have my doubts that much of this proposed new capacity will come to fruition.
Meanwhile, food and agri-business giant Cargill is set to lay off approximately five per cent of its global workforce, or 8,000 employees. The move comes in the wake of what it calls weak financial performance during fiscal 2024 and a restructuring of the business. Its layoffs are unprecedented in Cargill’s long history.
