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 $2.502 billion. The year before, it posted a record operating profit of $3.240 billion. But the segment suffered an historic loss in fiscal year 2024 and it faces a similar loss in 2025.
Tyson Beef reported an operating loss of $381 million for the year ended Sept. 30. This went against a loss of $91 million in fiscal 2023. This was despite the fact that sales of $20.479 billion were up 1.6% on 2023’s $19.325 billion, and that its average selling prices were up 4.4%. Beef had an operating loss in the fourth quarter of $71 million, versus a $323 million loss in the fourth quarter of 2023, so at least Tyson saw a significant year-on-year improvement in the quarter. Operating margin for 2024 was a negative 1.9%, versus a negative 0.5% in 2023.
Annual operating income decreased, primarily reflecting compressed spreads as expected, Tyson CFO Curt Calloway told analysts on Nov. 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 $400 million to $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 $244 million in fiscal 2006.
The reason for Tyson’s negative outlook is clear. It cited USDA projections that domestic beef production will decrease about 2% in 2025 versus 2024. Analysts forecast that 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 on 2023’s total, says Andrew Gottschalk, HedgersEdge.com. This would imply that the reduction in the annual cow harvest would comprise 83% of the reduction in this year’s total harvest. The balance belongs to steers and heifers, he says.
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, KS, which is a beef and pork non-harvest facility. It announced in a letter to employees that it would cease all operations on Feb. 14, 2025. Tyson officials reportedly told city officials that all Emporia operations would move to its Holcomb, KS, 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.
After careful consideration, Tyson made the difficult decision to close the Emporia to increase the efficiency of its operations, said Tyson Foods. It added that it employs more than 5,000 people across other Kansas facilities.
Meanwhile, food and agri-business giant Cargill is set to lay off approximately 5% 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.
“To strengthen Cargill’s impact, we must realign our talent and resources to align with our strategy,” the company said. “Unfortunately, that means reducing our global workforce by approximately 5%. This difficult decision was not made lightly. We will lean on our core value of putting people first as we support our colleagues during this transition.”
For fiscal year 2024, ended May 31, Cargill recorded $160 billion in sales, down nearly 10% from $177 billion in fiscal 2023. The company does not publish its annual earnings. Brian Sikes, chairman, president and CEO, noted in Cargill’s annual report that was published on Aug. 13 that ongoing challenges facing the global food system from disruptions caused by conflict, changing demographics and volatile economic and environmental conditions impacted the company. Also in August, Reuters reported that Cargill planned to reduce its business units from five to three, with the remaining three focused on food, farming and trade and “special” businesses.
As for the U.S. beef industry, I do not anticipate that any beef processing 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. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
