To say the past two years have been challenging for American meat companies is an understatement. But this year might be even more challenging if President-elect Donald Trump goes ahead with his threat to impose 25% tariffs on all goods from Canada and Mexico, an additional 10% in tariffs on all Chinese imports and a 100% tariff on imports from the BRICS (Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates) nations.
If enacted even at smaller percentages, the tariffs could sharply increase costs for American businesses and consumers. They would make US agricultural products, including meat, harder to market abroad, while simultaneously raising costs for farmers, food manufacturers and consumers, according to agriculture industry groups. Should Canada, Mexico and China impose retaliatory tariffs on US meat and poultry exports, they could severely damage what is a vital global trade for the industry.
Tyson’s challenges
Just two years ago, Tyson Foods Inc., the largest processor of fed beef in the industry, posted operating income for its beef segment of $2.502 billion and a record operating profit of $3.240 billion the year before. But the segment suffered a historic loss in fiscal 2024 and it faces a similar loss in 2025.
Tyson Beef reported an operating loss of $381 million for the year ended Sept. 30, 2024. This went against a loss of $91 million in 2023. This loss was despite the fact that sales of $20.479 billion were up 1.6% on 2023’s $19.325 billion and that its average selling prices were up 4.4%. Beef had an operating loss in the fourth quarter of $71 million, versus a $323 million loss in the fourth quarter of 2023, so at least Tyson saw a significant year-on-year improvement in the quarter. Operating margin for 2024 was a negative 1.9%, versus a negative 0.5% in 2023.
Annual operating income decreased, primarily reflecting compressed spreads as expected, Tyson chief financial officer, Curt Calloway, told financial analysts on Nov. 12. Uncertainties remain, including the timing and pacing of meaningful herd rebuilding intentions, he said. These market dynamics were reflected in Tyson’s range of outcomes for operating income for fiscal 2025, where it expects a loss of $400 million to $200 million. This reflects a similar level of profitability year-over-year at the midpoint, said Calloway. The 2024 loss far exceeded Tyson Beef’s previous largest-ever loss of $244 million in fiscal 2006.
The reasons for Tyson’s negative outlook were clear. It cited the US Department of Agriculture’s projections that domestic beef production will decrease 2% in 2025 versus 2024. Analysts forecast that total US cattle slaughter in 2024 is on track to be 1.3 million head lower than the 2023 total of 34.32 million head. The annual cow harvest will decline by approximately 1.028 million head on 2023’s total, said Andrew Gottschalk, principal at HedgersEdge.com. Analysts forecast that 2025 will see similar declines in total cattle slaughter, which will put even more pressure on beef processing margins.
Tyson Foods has closed several poultry processing plants in recent years and added a beef plant to its closure list in late November. Tyson said it expects to lay off 809 employees at its facility in Emporia, Kan., which is a beef and pork non-harvest facility. It announced in a letter to employees that it would cease all operations on Feb. 14, 2025. Tyson officials reportedly told city officials that all Emporia operations would move to its Holcomb, Kan., beef facility.
Tyson Foods took over the operation of the Emporia plant in 2001 after buying Iowa Beef Packers (IBP). IBP had operated the plant as a cattle slaughter and processing facility for many years. But it ended those operations in 2008. The plant had a daily slaughter capacity of 4,000 head. After careful consideration, Tyson made the difficult decision to close the Emporia facility to increase the efficiency of its operations, said Tyson Foods. It added that it employs more than 5,000 people across other Kansas facilities.
Slippery landscape
As for the overall US beef processing industry, analysts do not anticipate that any beef plants of any size will close in the coming year, although most if not all processors will lose money this year. The reduced cattle numbers suggest that as brand-new plants start operations, they will struggle to buy cattle from established players. At least eight new plants are in the works, with an avowed slaughter capacity of more than 9,000 head per day. Most analysts have doubts that much of this proposed new capacity will come to fruition.
Meanwhile, food and agri-business giant Cargill at the start of December said it would lay off approximately 5% of its global workforce, or 8,000 employees. The move comes in the wake of what it calls weak financial performance during fiscal 2024 and a restructuring of the business.
“To strengthen Cargill’s impact, we must realign our talent and resources to align with our strategy,” the company said. “Unfortunately, that means reducing our global workforce by approximately 5%. This difficult decision was not made lightly. We will lean on our core value of putting people first as we support our colleagues during this transition.”
For fiscal year 2024, ended May 31, Cargill recorded $160 billion in sales, down nearly 10% from $177 billion in fiscal 2023. The company does not publish its annual earnings. But Brian Sikes, chairman, president and chief executive officer, noted in Cargill’s annual report published on Aug. 13, that ongoing challenges facing the global food system from disruptions caused by conflict, changing demographics, and volatile economic and environmental conditions impacted the company.
Pork, poultry roll on
The outlook for the US pork and poultry sectors this year is much brighter, especially for chicken. Tyson Foods in fiscal 2024 had an operating loss of $40 million in its pork segment. But it said USDA projects domestic production will increase 2% this year versus last year and it anticipates adjusted pork operating income of $100 million to $200 million in 2025.
Chicken was the star performer for Tyson Foods and other poultry companies in 2024, and it will be more of the same this year. Tyson Foods’ chicken segment had operating income in 2024 of $988 million, a dramatic turnaround from a $770 million operating loss in fiscal 2023. It notes that USDA projects that chicken production will increase 3% in 2025, and it anticipates adjusted operating income of $1 billion to $1.2 billion.
The threat of tariffs, however, will overshadow the entire outlook for this year. Their economic impact could be immense, given the highly connected nature of the three North American countries. In fiscal 2024, Mexico became the No. 1 destination for American agriculture exports for the first time (with a value of $30 billion). Canada was No. 2 ($29 billion) and exports to China were No. 3 ($25.7 billion).
The United States in 2023 imported nearly 17 million tonnes of agricultural goods from Mexico worth $45.5 billion, according to USDA data. Top categories included fresh fruits and vegetables, (about two-thirds of all US vegetable imports come from Mexico) sugar, dairy products and distilled spirits like tequila. Meanwhile, Mexico last year imported 40.45 million tonnes of US agricultural goods worth $28.6 billion. Mexico is the No. 1 importer of US corn and corn sweeteners, leaving American corn farmers particularly exposed to retaliatory tariffs. US agricultural imports from Canada in 2023 totaled 23.6 million tonnes worth $40.1 billion, with top commodities including beef, pork, dairy products, oats and rapeseed oil.