June 16, 2023

 

Lower US beef packer margins expected for Tyson Foods

 

 

Lower US beef packer margins for Tyson Foods and other processors will continue as the US beef cattle herd rebuilds, according to Derrell Peel, livestock marketing analyst at Oklahoma State University Extension.

 

Packers like Springdale-based Tyson Foods lost about US$10 per head on the beef they processed for the week ending June 3. The loss per head widened from US$5 per head the prior week. Packers profited about US$87 per head a month ago and US$265 per head a year ago, according to Sterling Beef Profit Tracker.

 

Packer margins are being squeezed by higher live cattle prices driven by fewer cattle supplies which has pushed processing capacity utilisation down to 79% in recent weeks.

 

Peel said the beef cow herd will likely decrease this year with a low occurring in the January report. This is the point where the industry will try to rebuild. He added that drought-forced beef cow herd liquidation made the beef industry smaller than it needs or plans to be.

 

Peel noted there has been recent improvement in the remaining drought regions in the central and southern Great Plains in the United States which could halt liquidations.

 

"The first step to stabilising the beef cow herd is the reduction of beef cow slaughter and a lower rate of cow culling," Peel said. "Following record beef herd culling in 2022, beef cow slaughter is down 11.5% so far in 2023, a sign that herd liquidation is slowing."

 

He expects beef cow slaughter to decrease more sharply in the second half of the year.

 

Tyson Foods chief executive officer Donnie King recently said the cattle market is a long way from recovery. He added that Tyson would manage the metrics within its control.

 

Tyson Foods expects its beef segment to break even for the next couple of fiscal quarters as cattle availability is likely to worsen and export demand remains soft.

 

Fewer cattle to buy has sent live cattle prices higher to US$180 per hundredweight, up 28.5% from a year ago and 38.4% above than the five-year average, according to Stephens Inc. Commodity report from June 6. Packers have purchased fewer cattle, pushing slaughter and production numbers down about 5% from a year ago.

 

- Talk Business & Politics-Statewide