Cattle Supply Crisis Continues to Hurt Tyson's Beef Earnings

The Beef Problem Is Not Going Away

Tyson Foods reduced its full-year profit outlook, a sign that the beef division is unlikely to get substantial relief from the severe cattle shortage anytime soon.

The reduced forecast indicates that Tyson's capacity cuts are not yet paying off meaningfully in its beef operations. Tyson closed a beef processing plant in Nebraska and trimmed production at a Texas facility, steps intended to reduce the scramble for cattle and support packer margins.

Beef has been the company's biggest problem for more than a year. The segment's quarterly losses began in early 2024, and Tyson has tried to match slaughter capacity with a much smaller cattle supply. Even with those curtailments, cattle prices have stayed high, keeping pressure on beef margins.

The lower guidance also follows some encouraging signs for beef, including a planned restart of cattle imports from Mexico and hints that US ranchers may be starting to rebuild herds. Still, packers probably won't benefit much from those developments in the near term.

The beef segment remained in the red in the third quarter.

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Tyson's beef difficulties persist even though the US cattle herd was only slightly larger on July 1 than the previous multi-decade low, according to the Department of Agriculture. Tight supplies have kept cattle purchase costs elevated for packers. In its report, USDA indicated that ranchers are retaining more beef cows to increase herd numbers. The agency also plans to reopen an Arizona crossing for Mexican cattle later this month and is reviewing two ports in New Mexico.

Screwworm Adds to the Supply Squeeze

Imports of Mexican cattle were stopped in November 2024 and have mostly remained halted because of concerns about New World screwworm, a parasite whose larvae can eat animal flesh and be fatal if left untreated. With only limited spread detected in the US, the border is reopening. The parasite was found in Texas livestock in early June, the first such US case in about 50 years.

Since then, roughly 40 animal cases, mostly cattle, have been confirmed, largely in southern Texas, while close to 2,000 active cases remain in Mexico. Historically, Mexico sends about one million cattle north each year.

Even if some cattle from Mexico can move quickly, the restart will not mean much until ports in New Mexico are accepting animals; Heather Jones, who founded Heather Jones Research LLC, called the Douglas, Arizona, crossing "relatively small."

Rebuilding Cattle Supplies Takes Time

Darin Parker, president of meat distributor PMI Foods, said cattle flows should eventually return to pre-closure levels, though that could take "probably a year and change." The supply effect probably will not be felt until late winter or early spring, because many Mexican cattle are fattened in the US for several extra months before slaughter.

Tyson's poultry segment, by contrast, remains a strong source of growth, cushioning the company from beef's losses. The chicken business generated $488 million in adjusted operating income in the third quarter, up almost 9% from the same quarter a year earlier.

What It Means for Investors

For investors, the revised guidance shows that beef losses are likely to keep weighing on Tyson's results even as its chicken business improves. The path back to cattle supply growth depends on how quickly the herd rebuild and Mexican cattle imports translate into more available animals.

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