U.S beef processors, especially those that produce fed beef, made billions of dollars in profits during the COVID-19 pandemic years. Tyson Foods, the industry’s largest fed beef processor, had an operating income in beef of $9.493 billion in the five years from 2018 to 2023. But that year saw its first annual loss since 2015, and Tyson then reported its largest ever loss ($381 million) in 2024. The losses have continued this year, and Tyson now anticipates a beef operating loss between $375 million and $475 million for fiscal 2025.
In contrast to packers’ pandemic profits, prices for all classes of cattle plunged, especially when packing plants were forced to run at severely reduced production levels due to worker absenteeism because of COVID-19 related illnesses. But now the picture has flipped, with packers losing historic amounts of money and cattle producers—from cattle feeders to cow-calf operators—having probably their most profitable year ever.
This column has regularly discussed the main drivers of this profitability. But they start with the fact that the U.S. cattle herd is the smallest since 1951 and that beef demand, particularly at home, is remarkably strong, even in the face of record-high retail beef prices. USDA’s retail Choice beef price in August averaged $9.85 per pound, while its All-Fresh Beef price averaged $9.18/lb. Ground beef prices also set new record highs.
Cattlemen are now making a record profit of more than $700 per animal, up from just $2 five years ago, according to some industry estimates (as reported by The Wall Street Journal on Sept. 15). Ranchers are putting some of their windfall toward upgrading long-neglected equipment, while others are paying off longstanding debts and upgrading their beef cow herds, said WSJ. As an example, Nebraska rancher Shaun Loughery is pouring his earnings into bull semen. In past years, he has spent around $120,000 annually on semen and breeding bulls. His focus is to produce cattle that can yield juicier steaks and fetch higher prices. This year, Loughery plans to double his typical investment. And even though his profit is up roughly 35% compared with last year, he isn’t taking a vacation. He’s doing ultrasounds on his bred heifers.
Ranchers across the Great Plains and elsewhere started selling off their cattle several years ago as drought conditions dried up grazing pastures, WSJ said. Losses that racked up during the COVID-19 pandemic, coupled with persistent inflation and high interest rates, compounded their economic woes. Many ranchers have since held back from increasing the size of their herds.
Ranchers’ annual income varies depending on their size, but industry officials estimate that a herd the size of Loughery’s (1,000 head) could generate roughly $300,000 this year, WSJ said. Loughery said that kind of money could be enough to spend even more to boost the quality of his livestock and hire another full-time employee.
The industry is split on how long the good times for ranchers will last, WSJ said. Executives of Tyson Foods and JBS SA, two of the world’s largest meat companies, have projected that cattle supplies could tick up in 2027 or 2028. That could help ease costs for processors and curb ranchers’ big paydays. But Derrell Peel, a professor of agricultural economics at Oklahoma State University, doubts many ranchers have started rebuilding their herds. They have struggled to make a living and are using this moment to pay down their debts. “If we have started it, it’s in the very early stages,” he told WSJ.
Meanwhile, the industry faces two threats to continued producer profits: a possible erosion in beef demand and the destructive New World screwworm (NWS) parasite being detected in the U.S. It moved dangerously close to the U.S. border with Mexico when Mexico’s National Service of Agro-Alimentary Health, Safety and Quality (SENASICA) announced on Sept. 21 that a new case of NWS had been detected less than 70 miles from the border in Sabinas Hidalgo, Nuevo León.
USDA issued its own announcement a few hours later. This case is now the northernmost detection of NWS since the current outbreak began, USDA said. It is one most threatening to the American cattle and livestock industry, considering Sabinas Hidalgo is located near a major highway running from Monterrey, Nuevo León, to Laredo, TX, one of the most heavily trafficked commercial thoroughfares in the world, USDA said. Before this detection, the previous northernmost case appeared on July 9 in Veracruz, Mexico, which is approximately 370 miles further south of the border — 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.)
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