Got beef?... Tyson shares had their worst drop in a decade yesterday after the poultry powerhouse badly missed earnings expectations and chopped its annual sales forecast. It produces one of every five pounds of chicken, beef, and pork eaten in the US. But last quarter the nugget giant lost nearly $100M, down from an $829M profit last year.
Bad meat: Tyson's beef unit makes up nearly 40% of its annual revenue, but sales fell 8% last quarter as cash-strapped consumers cut back on the pricey protein.
Cold wings: Tyson's chicken biz also saw its profit margins shrink as the cost of animal feed rose $145M.
Farming snafus… The meat industry has gotten grilled as recent droughts and pricey farming costs (think: fertilizer, feed, fuel) make it harder to maintain livestock. Tyson said its live cattle costs are up $305M from last year. Now some farmers are selling their animals for slaughter at premium prices because keeping them is too expensive. Meanwhile, falling demand for beef is making it harder for producers like Tyson to pass on higher costs to consumers.
Dry spells can change appetites… US cattle inventory has already dropped more than 3% from last year, and over 90% of cows are in poor-to-fair grazing conditions. The USDA predicts this year will mark the first decline in beef production since 2015, and the per-person supply is expected to drop by 5.6% this year, which would be the greatest decline since 1987. Supply challenges could accelerate the trend of declining demand for red meat in the US, the world’s largest beef consumer.