By Tom Polansek and Neil J Kanatt
Aug 3 (Reuters) – Tyson Foods lowered its annual profit forecast on Monday, warning that losses in its beef business would widen as tight U.S. cattle supplies keep livestock costs elevated.
U.S. meatpackers have bled money in their beef businesses because increased costs for cattle have outpaced gains from soaring selling prices for steaks and hamburger meat.
The cut to Tyson’s forecast signals more financial pain for the sector after the company this year closed a massive beef plant in Nebraska and slashed operations at a facility in Texas, laying off thousands of workers.
Shares of the Springdale, Arkansas-based company were down about 5% in early trading.
PROLONGED DROUGHT DRIVES UP BEEF PRICES
U.S. ranchers reduced the nation’s cattle herd to its lowest level in 75 years after a prolonged drought burned up pastures and raised feed costs, driving up beef prices and squeezing meatpackers’ profit margins.
Higher prices have also weighed on demand as inflation-conscious consumers curb spending.
U.S. cattle supplies were further constrained after Washington suspended imports of livestock from Mexico more than a year ago in an attempt to keep out the flesh-eating pest New World screwworm. The agency plans to start lifting its ban this month.
Resuming imports will not have a material impact on Tyson’s earnings in the fiscal year that ends in September, though it provides the potential for some improvement in 2027 and beyond, CEO Donnie King said on a conference call.
“The reopening of the Mexican border will not solve the entire gap of beef losses we are currently seeing,” he said.
SOME CONSUMERS TURN TO CHICKEN AS CHEAPER PROTEIN SOURCE
Tyson now expects fiscal 2026 adjusted operating income of $2.1 billion to $2.3 billion, compared with its previous forecast of $2.2 billion to $2.4 billion.
For its beef business, the company forecast an adjusted operating loss of $500 million to $650 million, compared with its prior expectation of a loss of $350 million to $500 million.
Beef sales volumes fell 15.9% in the quarter that ended on June 27, while prices jumped 12.1%.
As beef prices rise, some consumers have turned to chicken as a cheaper source of protein, helping Tyson offset part of the weakness in its larger beef segment.
Chicken sales volumes rose 1% during the quarter, while adjusted operating margin in the segment increased 11.2%.
“The beef business has been a persistent headwind for the past three years and a key reason the stock has failed to meet expectations, despite the significant turnaround and margin improvement in the chicken segment,” said Arun Sundaram, analyst with CFRA Research.
Tyson reported quarterly sales of $13.87 billion, below analysts’ estimates of $14.12 billion.
It expects annual revenue growth of 2.5% to 3.5%, compared with analysts’ expectations of a growth of 4.3%, according to data compiled by LSEG. The company had previously forecast growth of 2% to 4%.
(Reporting by Tom Polansek and Neil J Kanatt in Bengaluru; Editing by Vijay Kishore and Jan Harvey)
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