U.S. agriculture and the red meat industry breathe a sigh of relief as President Trump delays the implementation of punishing tariffs on Canadian and Mexican goods. President Trump had announced on February 1 25% tariffs on all imports from Canada and Mexico and 10% additional tariffs on imports from China. Canada and Mexico initially retaliated by imposing tariffs on a wide range of U.S. goods entering the two countries. But these were then delayed. Both countries said they discussed with President Trump about increased border security and countering drug trafficking. The White House had said it was implementing the tariffs to stem the flow of migration and fentanyl into the U.S. The new tariffs on China took effect last Tuesday.
Canada initially imposed tariffs on $30 billion of American goods, followed by $125 billion worth of other American products later on. Its tariffs provided insight into what Canada might still target. Its list included meat, poultry, eggs, dairy products, dairy ingredients, honey, tomatoes, legumes, nuts, fruit, coffee, tea, spices, grain-based commodities like wheat, rye, barley, oats, canola and rice, margarine, processed meats, sugar, molasses, chocolate, malt extract and sauces. The Mexican government did not provide a specific list of U.S. products subject to tariffs but its plan included a focus on U.S. goods from “Republican strongholds.”
Industry Groups Weigh In
Industry groups in the U.S., Canada and Mexico now have the chance to redouble their efforts to urge President Trump not to proceed with tariffs. The U.S. Meat Export Federation (USMEF) said it strongly supported ratification of the US-Mexico-Canada Agreement and it would like to see all parties honor the terms of that agreement. It is hopeful that talks between President Trump, President Sheinbaum and Prime Minister Trudeau and their advisers will lead to resumption of tariff-free red meat trade, it said. The Meat Institute said it had heard from several members about concerns regarding tariffs on live cattle and hog imports, in particular. The Canadian Meat Council (CMC) said cross-border trade in the North American meat industry exceeds C$16 billion annually. It urged government officials to prioritize dialogue and seek a balanced solution that preserves the benefits of the deeply integrated supply chains. At stake are thousands of jobs, billions in economic activity, and the competitiveness of the North American meat sector on the global stage, it said.
Tyson Foods last Monday downplayed the prospect of tariffs on a call with analysts. One analyst noted that approximately 10% of every hog in the US is sent to Mexico. Tyson’s teams continuously engage in contingency planning to minimize business disruption from trade or supply chain changes, said president and CEO Donnie King. As it has done in the past, it will leverage its global expertise to identify the best markets for its products amid evolving conditions. It has chicken leg quarters going into Mexico, which is a large trading partner for Tyson. What Tyson would do, whether it be pork or chicken, is to find other markets, he said.
King later told Yahoo Finance that the company does not expect to see a significant impact from tariffs and had planned for tariffs within its annual adjusted operating income forecast. Tyson has planned for tariffs, for immigration and any market dynamics, and have baked that into its guidance for the balance of the year, King told Yahoo Finance. Tyson’s teams have engaged in contingency planning to minimize disruptions or impacts to the supply chain for some time. There will be short-term disruptions but it will equilibrate. For example, Tyson sends roughly 10% of every hog it processes to Mexico. It may need to do some shuffling if Mexico goes through with retaliatory tariffs, said King.
TYSON CHICKEN HAS BEST EVER QUARTER
TYSON Foods’ chicken segment in Tyson’s fiscal 2025 first quarter reports its best ever adjusted operating income and its best operating income in eight years. Chicken’s huge performance more than made up for a small loss in Tyson’s beef segment. In fact, Tyson last week sounded almost as pleased with beef’s better than expected performance as with its chicken profits. Beef revenue increased from $5.023 billion in 2024 to $5.335 billion, primarily from higher volumes, increased carcass weights and higher head throughput, CFO Curt Calaway told analysts. Adjusted operating income improved due to an increase in Tyson’s value-added mix and an inventory valuation adjustment impacting first quarter last year. But its beef guidance for fiscal 2025 remains unchanged, with an expected loss of $400M to $200M. This balances operational improvements against tighter price spreads throughout the remainder of the year, he said.
Fiscal 2025 is off to a strong start, as Tyson delivered its third consecutive quarter of year-over-year growth in sales, operating income and EPS, said president and CEO Donnie King. Its best quarterly performance in more than two years reflects improved execution across the business, including exceptional results in chicken. Consumers remain focused on adding protein to their diets, and Tyson’s diversified multi-channel, multi-protein portfolio ensures it is well-positioned to meet this demand while reinforcing its leadership as a world-class food company. Tyson delivered better than expected results in beef and significant improvement in profitability in international and other, while prepared foods continues to generate solid profits and margins. The first quarter performance set the tone for what Tyson anticipates will be another year of growth, he told analysts.
Tyson’s first quarter adjusted operating income increased by $248M to $659M, a remarkable 60%, while adjusted operating income margin expanded by 170 basis points versus last year, said King. Adjusted earnings per share grew by an impressive 65% to $1.14. In total, the first quarter delivered the best quarterly performance in more than two years, while Tyson has managed through ongoing challenges posed by the current cattle cycle. Protein remains at the forefront of consumer preferences based on both per capita consumption data and consumer surveys. A recent study by International Food Information Council revealed that 71% of U.S. consumers in 2024 sought to increase their protein consumption. This was up from 59% in 2022, said King.
Beef Volume Was Up 5.6%
As noted, Tyson beef’s sales were up 6.2% in the quarter versus last year. Volume was up 5.6% from last year while the average sales price was up 0.6%. It reported an operating loss of $64M, versus a $206M loss a year earlier. The adjusted operating loss was $32M, versus a $117M loss a year earlier. The operating loss produced a negative 1.2% margin while the adjusted loss meant a negative 0.6% margin. These went against a negative 4.1% margin and a negative 2.3% margin, respectively, in the prior year. USDA projects that domestic beef production will decrease approximately 1% in fiscal 2025 as compared to fiscal 2024, says Tyson.
Tyson’s chicken segment had sales of $4.065 billion in the quarter, versus $4.033 billion a year earlier. Volume was up 1.5% but the average sales price was down 0.7%. Operating income was $351M versus $177M. Adjusted operating income was $368M versus $192M, for a 3.6% margin. USDA projects that chicken production will increase approximately 2% in fiscal 2025 as compared to fiscal 2024. Tyson anticipates adjusted operating income of $1.0 billion to $1.3 billion for fiscal 2025, it says.
Tyson’s next best performer was its prepared foods segment. It had sales of $2.473 billion, versus $2.543 billion a year earlier. Volume was down 3.2% but the average sales price was up 0.4%. Operating income was $209M versus $243M, while adjusted income was $234M versus $264M for a 9.5% margin. Tyson’s pork segment had sales of $1.617 billion, versus $1.517 billion a year earlier. Volume was down 0.4% but the average sales price was up 7.0%. Operating income was $59M versus $39M, while adjusted income was $59M versus $68M for a 3.6% margin. USDA projects that domestic production will increase 2% in fiscal 2025 as compared to fiscal 2024. It anticipates adjusted operating income of $0.1 billion to $0.2 billion in fiscal 2025.
CATTLE TOTAL IS SMALLEST SINCE 1951
USDA’s annual cattle inventory report confirmed that the U.S. cattle population fell again last year and was the smallest since 1951. USDA reported a January 1 total of 86.662M head, down 0.6% from the 2023 total of 87.175M head. The big difference between 1951 and this year is that beef production then totaled 8.1 billion pounds. The beef industry in 2024 produced just over 27.0 billion lbs of beef, approximately 3.2 times more than in 1951. Last year completed the sixth consecutive year of herd liquidation, which began from the 2019 cyclical peak at 94.8M head. This meant a decline of more than 8M head It is highly likely that this year will be the last year of herd liquidation for this cycle, says Andrew Gottschalk, HedgersEdge.com.
The cyclical lows in annual cow slaughter are near, with a much smaller level of liquidation forecast this year versus last year, says Gottschalk. In contrast, annual heifer slaughter, which barely increased last year, is estimated to offset a significant portion of any slowdown in the annual cow harvest. Heifer slaughter this year is estimated to decline by approximately 400,000 head. As such, any reversal from herd liquidation to expansion should prove to be at a slower pace than in previous cycles, he says.
Most Categories Were Down 1%
The report showed that all cows and heifers that have calved, at 37.2M head, were slightly below the 37.4M head on January 1, 2024. The number of beef cows on January 1 was 27.9M head, down 1% on 2023. The number of beef cow replacements (heifers held back for herd rebuilding) was 4.67M head, down 1%. This meant that herd rebuilding did not begin in 2024. All heifers 500 lbs and over as of January 1, 2025 totaled 18.2M head, 1% below the 18.3M head on January 1, 2024. Milk replacement heifers, at 3.91M, were down 1% from the previous year. Other heifers, at 9.59M head, were 1% below a year earlier.
Steers weighing lbs and over as of January 1, 2025 totaled 15.8M head, down 1% from January 1, 2024. Bulls weighing 500 lbs and over as of January 1, 2025 totaled 2.01M head, down 1% from January 1, 2024. Calves under 500 lbs as of January 1, 2025 totaled 13.5M head, down slightly from January 1, 2024. USDA estimated the 2024 calf crop 33.5M head, down slightly from the previous year’s calf crop. Calves born during the first half of 2024 were estimated at 24.6M head, down slightly from the first half of 2023. Calves born during the second half of 2024 were estimated at 8.93M head, which was 27% of the total 2024 calf crop.
COF Total Was 14.3M Head
Cattle and calves on feed for the slaughter market in the U.S. for all feedlots totaled 14.297M head on January 1, 2025, said the report. The inventory was down 0.9% from the January 1, 2024 total of 14.426M head. Cattle on feed in feedlots with capacity of 1000 or more head accounted for 82.7% of the COF total on January 1, up slightly from the previous year. The combined total of calves under 500 lbs and other heifers and steers over 500 lbs outside of feedlots, at 24.6M head, was slightly below January 1, 2024.
USDA’s monthly COF report showed a January 1 total of 11.823M head in feedlots 1000 head and larger. This was 99.1% of a year ago and was 107,000 head lower than a year ago. December placements at1.642M head were 96.7% of a year ago and were 5.1% lower than forecast. December marketings at 1.742M head were 101.0% of a year but were 96.5% of a year ago after taking one extra slaughter day in December into account. The COF total included 7.248M steers and steer calves, up 0.7% from the previous year. This group accounted for 61.3% of the total inventory. Heifers and heifer calves accounted for 4.575M head, down 3.4% percent from 2024. Arizona (down 12%), Idaho (down 1%), Kansas (down 3%), Texas (down 3%) and Washington (down 6%) had fewer cattle on feed than a year ago. Texas had the most cattle on feed with 2.780M head, with its total down 80,000 head from a year ago. Nebraska was second with 2.580M head, up 20,000 head. Five states placed more cattle than a year ago. Arizona placed 15% more, Iowa placed 4% more, Kansas 4% more, Nebraska 6% more and South Dakota 3% more. Four states marketed fewer cattle in December than last year. California marketed 20% fewer, Colorado 4% fewer, Texas 5% fewer and Washington 5% fewer.
Lightest Categories Placed Fewer Cattle
Regarding placement weights, the three lightest categories placed 75,000 fewer cattle than a year earlier, while the three heaviest categories placed 19,000 more cattle. The under 600 lb category saw 40,000 fewer cattle placed than last year (395,000 head). The 600-699 lb category saw 30,000 fewer cattle placed (380,000 head). The 700-799 lb category saw 5000 fewer placed (375,000 head). The 800-899 lb category saw 9000 more placed (287,000 head). The 900-999 lb category saw 5000 more placed (115,000 head) and the 1000 lbs plus category saw 5000 more placed (90,000 head).
This Friday’s COF report is expected to show a February 1 COF total around 11.790M head, which would be 100% of last year’s total. January placements were expected to be 1.900M head, up 6% on a year ago. January marketings were expected to 1.870M head, 101.5% of last year. The number of cattle on feed 150 days or more on February 1 was expected to be 2.260M head. This was down 0.8% on last year but up 10% on the previous five-year average, says Gottschalk.
Meanwhile, the five-week run of record high cash live cattle prices might have ended last week. Prices the week before last, basis a 5-area steer, averaged $209.57 per cwt live or $329.07 per cwt dressed. These were up $0.38 per cwt and down $0.65 per cwt, respectively. Trade last week again started slowly. Wednesday saw a light trade in all regions, with prices up north at $207-209 per cwt live or at $325-328 per cwt dressed. Prices down south were at $203-206 per cwt live. Trade was more active on Thursday, with prices similar to the day before. Carcass weights declined in the latest reported week ended January 25 but remained far above year ago levels. Steer weights averaged 948 pounds, down 6 lbs on the week before but up 36 lbs on the same week last year. Heifer weights averaged 865 lbs, down 3 lbs from the week before but up 40 lbs on the same week last year. Overall weights averaged 872 lbs, down 2 lbs but up 39 lbs, respectively. This was the equivalent of adding 27,805 head to that week’s slaughter total of 593,858 head, according to HedgersEdge.com.
Daily boxed beef cutout values continued to decline last week even though the week’s slaughter total was an estimated 584,000 head. This largely reflected even more negative margins for fed beef processors. HedgersEdge.com estimated the loss on Thursday at $202.95 per head. The week before last saw the comprehensive cutout (cuts, grinds and trim) average $330.51 per cwt, down $1.34 per cwt from the prior week. Of note was the spot market sales accounted for 30.0% of the total volume of 6558 loads and formula sales accounted for 58.1%. Forward and exports sales accounted for 11.8% and 11.0%, respectively. The Choice cutout the first four days last week declined by $3.70 per cwt to $323.98 per cwt.
JBS INVESTS $200M IN TWO PLANTS
JBS USA is investing $200M in two major projects at its Cactus, Texas, and Greeley, Colo., beef production plants. Through the investment, the company is adding a new, state-of-the-art fabrication floor and expanded ground beef room at the Cactus facility and a new distribution center at the Greeley location. Construction will begin in 2025. JBS believes now is the time to invest in the U.S. and it is excited about what the future holds, say Wesley Batista Filho, CEO of JBS USA. The announcement demonstrates JBS’s commitment to the U.S. beef industry and the American farmer and rancher. JBS prioritizes ongoing investments in its facilities to ensure that the company and the rural areas where it lives and works are positioned for success now and in the future, says Filho.
The investments will improve efficiencies at each facility and offer the potential for increased production capacity in the future, says JBS. JBS’s Cactus facility employs over 3700 team members and partners with several cattle producers, paying $2.9 billion for livestock every year. JBS’s Greeley facility employs over 3800 team members and partners with approximately 175 producers, paying $3.1 billion for livestock every year.