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 lost money in their beef businesses because rising cattle costs have outpaced gains from soaring prices for steaks and hamburger meat.
The cut to Tyson’s forecast signals more financial pain for the sector after the company closed a massive beef plant in Nebraska this year and cut operations at a facility in Texas, laying off thousands of workers.
Cattle supplies shrank to a 75-year low after a prolonged drought burned up grazing lands in the western U.S. and Washington suspended imports from Mexico in an attempt to keep out the flesh-eating livestock pest New World screwworm. However, screwworms were detected in June on Texas farms and in New Mexico after moving north through Central America.
Facing pressure to lower consumer costs, the Trump administration said it plans to start lifting the import ban this month. It may take up to a year for Tyson to benefit from the move because imported feeder cattle must spend time grazing on grass or being fattened in feedlots to get ready for slaughter, Chief Operating Officer Wes Morris said on a conference call.
“The reopening of the Mexican border will not solve the entire gap of beef losses we are currently seeing,” CEO Donnie King said on the call. Restarting U.S. imports could lead to some improvement in 2027 and beyond, he added.
WEAKER BEEF OUTLOOK
Tyson 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 $350 million to $500 million loss.
“Beef hasn’t performed the way we expected, and we’re not pretending otherwise,” King said.
Beef sales volumes fell 15.9% in the quarter that ended on June 27, while prices jumped 12.1%.
SOME CONSUMERS TURN TO CHEAPER CHICKEN
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%.
Tyson said it expected “another constructive year” in its chicken business in 2027. The company’s shares were up about 3%.
“Once the beef segment eventually recovers, even if the timing remains uncertain, Tyson could be well positioned to deliver meaningful earnings growth,” said Arun Sundaram, analyst with CFRA Research.
Tyson reported quarterly sales of $13.87 billion, below analysts’ estimate of $14.12 billion.
It expects annual revenue growth of 2.5% to 3.5%, compared with analysts’ expectation of growth of 4.3%, according to data compiled by LSEG. The company had previously forecast growth of 2% to 4%.
(Reporting by Tom Polansek in Chicago and Neil J Kanatt in Bengaluru; Editing by Vijay Kishore, Jan Harvey, Rod Nickel)
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