This past week, both Tyson Foods and Cargill released some grim news surrounding their business plans for 2025. This sheds light on a few things, namely how tight things have gotten for all of agriculture, but also what these companies now expect their balance sheets to look like.
Over the past two years, Tyson Foods has closed six poultry processing facilities and a pork plant and is continuing this trend by announcing the closure of an Emporia, KS, meat facility that focused primarily on ground beef and marinated protein products. Two days later, the company announced two plant closures in Pennsylvania that developed prepared food products. Altogether, the company is feeling the pinch in producing proteins across North America.
In 2023, Tyson showed income of $233 million for its beef products, but later plummeted to a net loss of $291 million in 2024. Higher live cattle costs, higher labor and supply chain costs have stripped the profit out of the entity. In 2022, Tyson made profits of $3.2 billion but yielded this to a $648 million loss in 2023. This current year’s numbers are going to be propped up in true corporate fashion. Pressure to show Wall Street long-term viability is under the microscope at the moment.
The staggering numbers Tyson shows even while closing so many poultry plants show this model has worked with the company having $4.25 billion in poultry product sales in the fourth quarter of this fiscal year. Clearly, they are positioning themselves for responses in the same fashion on the beef side.
Across the aisle of the Big Four, Cargill announced a massive layoff of 5% of its labor force in an effort to streamline business efficiency. This move was a result of a broader-spectrum reaction to all of agriculture, not just the beef sector. Cargill is known worldwide for operating in 70 countries and occupies space in over 125 different markets. The company has felt the pinch regarding several global issues from the Ukrainian/Russian conflict all the way to the U.S. beef cattle cycle. The announcement will impact roughly 8,000 workers in the company.
According to a report by Agriculture Dive, since February, Cargill has laid off manufacturing workers at a Nashville beef plant, sold a California beef processing facility and offloaded a dry sausage plant to competitor Smithfield. Cargill also sold eight grain facilities to agribusiness CHS.
Cargill announced its income trend and showed a record profit in 2022 set at $6.7 billion, but that number dropped to $2.5 billion this year. Going back further, profits of $2.5 billion were about the average yearly profit from 2015-20 before spiking to the record. We have to keep in mind that last year it took $177 billion in revenue to produce $3.9 billion in profit.
While all this is going on, remember that McDonald’s Corporation announced a major price-fixing lawsuit against the Big Four and is all but guaranteed a massive settlement. McDonald’s is now just in a long line of entities who reached settlements against these companies for the corruption that took place post-2015.
On the production side, the last few weeks have seen a drastic rally in nearly every class of cattle including bred cattle. Lightweight cattle ready to turn out have seen the sharpest surge with many strings weighing under 500 pounds bringing well into the $400/cwt prices. Cattle are simply on the move right now with winter conditions turning quickly favorable for getting cattle out and on the gain.
Bred cattle jumped sharply in the last month with some special sales in the North averaging in the mid-$3,000s for higher quality heifers. In spots, bred heifers are reaching in the mid-to-higher $3,000s and we’ll look to see this continue through the end of the year.
For the first time in nearly two years of stronger markets, it actually feels like cattlemen are wanting to have retention on their mind; it’s just that the inventory isn’t there. If things stay constant, we will most likely see more heifers retained from next year’s crop.
What does this mean? It means we still have a little time in this market. These bred cattle aren’t going to make a dent in overall supply to impact the next marketing crop. Retention of heifer calves takes time, and the national cow inventory is still at a record low. There are going to be corrections and rallies, but overall, the fundamentals of inventory are still in favor for the cow-calf guy.
From the corporate side, we see they are positioning themselves to adjust to continued tight supply and lower commodity prices. I do think we are going to see countless headlines just like we did this past week and it’s unfortunate for those affected.
The peaks and valleys we will see in the marketplace will have a lot of added volatility over the next 24 months. Staying sharp and driven with purpose will have a lot of incentive. — LOGAN IPSEN
