THE cash live cattle and wholesale beef markets are still under pressure and will remain so until after the Thanksgiving holiday on November 28. Last week saw prices in both markets weaken from the prior week, which in turn saw declines from the week before. The 5-area steer price the week before last averaged $186.53 per cwt live or $293.13 per cwt dressed. These were down $3.30 per cwt and $3.84 per cwt, respectively, from the prior week. The only trade of note through last Wednesday was up north at $185-186 per cwt live or $290 per cwt dressed. The comprehensive cutout the week before last averaged $311.45 per cwt, down $4.69 per cwt from the prior week. The Choice cutout the first three days last week declined as well.
CATTLE ON FEED FORECASTS
David Anderson, Texas A&M University: COF 99.5%, placed 101.8%, marketed 105.3%; Tyler Cozzens, Livestock Marketing Information Center: COF 99.7%, placed 102.6%, marketed 105.0%; Andrew Gottschalk, HedgersEdge.com: COF 100.1%, placed 105.3%, marketed 105.4%; Rich Nelson, Allendale Inc: COF 99.9%, placed 102.8%, marketed 105.0%; Lori Porter, Allegiant Commodity Group: COF 100.0%, placed 103.8%, marketed 104.7%; Mike Sands, MBS Research: COF 100%, placed 104%, marketed 105%
COF TOTAL REMAINS UNCHANGED
THE November 1 Cattle on Feed (COF) total remained virtually unchanged from a year ago. Analyst Andrew Gottschalk, HedgersEdge.com estimated the total to be 11.963M head, 77,000 above the previous five-year average. The increase in COF totals from July 1 to November 1 was 693,000 head, versus the prior five year average gain of 511,000 head during that timeframe. Front-end fed cattle supplies (COF 150 days or more) on November 1 are estimated to have been 2.567M head, 1.2% below the previous year but 10.7% above the previous five-year average. October placements were likely to be up 4-5% from a year ago while marketings were also up 4-5% but benefited from one extra marketing day versus October last year.
Carcass weight data confirms that this category of cattle remains front-end loaded, says Gottschalk. Actual steer and heifer carcass weights for the latest reporting week ended November 2 were 31 and 25 lbs above year ago levels, respectively. Both were new records. Average carcass weights (including cows) were up 34 lbs. This was the equivalent of adding approximately 25,110 cattle to the weekly harvest. Carcass weights have advanced faster than normal since making their respective seasonal lows, says Gottschalk. Carcass weights seasonally tend to peak during the late Nov-Dec period. This may be unlikely as an end result in 2024, as it still pays to add weight. Placements going forward are likely to decline year-on-year. Dry conditions forced many cattle to move off grass earlier than normal, so these are placed already. Additional shrinkage will accelerate in the feeder cattle and calf supplies outside feedyards as increased heifer retention begins, says Gottschalk.
HOLIDAY BREAK: CBW will not be published on November 25 or December 2 (dated November and 22 and November 29 for Web subscribers) due to travel and the Thanksgiving holiday week. These are the last two weeks of four publishing weeks that CBW takes off each year. This also means that there will be no Friday alerts and market updates on November 22 and November 29. The next issue of CBW is on December 9 and the next alert and market update will be on December 6.
BEEF EXPORTS WILL INCREASE 5%
U.S. beef exports will increase 5% in 2024 over 2023 exports, while pork exports are on pace to set volume and value records by the end of 2024 by surpassing 3M metric tons (mt) and a value of $8.63 billion. Beef exports are projected to reach 1.28M mt worth $10.5 billion, The U.S. Meat Export Federation (USMEF) released these projections at its annual strategic planning conference. During the opening of the conference, president and CEO Dan Halstrom said one key factor in the export performance was the growth in demand for U.S. red meat in Latin America.
Halstrom highlighted the importance of keeping a piece of the market share with the ongoing competitiveness from other countries worldwide. Brazil is starting to get more volume into Mexico, Central America and even Japan, said Halstrom. That being said, U.S. quality in beef, pork and lamb is second to none. Its products command a superior price and that is the way that USMEF is approaching it when it works to develop these markets. The U.S. needs to maximize opportunities in its major markets and carve out new destinations such as Africa for the future, he said.
The conference’s closing session included a USMEF staff panel focused on the importance of market diversification and developing new opportunities for U.S. pork, beef and lamb in emerging destinations. Scott Reynolds, assistant vp of marketing programs, described how USMEF categorizes markets for beef and pork and showed how allocations of USMEF investments in new and emerging markets has grown 22% in the past five years. These are markets with less current volume but greater upside potential. New and emerging markets can also help manage risk when market access issues occur in the leading markets for beef or pork, he said.
Africa Tops Untapped List
Africa tops the list in terms of new, untapped markets for U.S. red meat, says USMEF. Africa Representative Matt Copeland focused on population and economic growth and reminded the audience that by 2050, one in four people in the world will be African. It will take time but USMEF cannot underestimate the importance of the economic evolution in Africa, he says. The geographic reach is immense. It is more than 7000 miles from Casablanca in Morocco in the north to Cape Town in South Africa. One of the world’s finest beef restaurants will open in Marrakesh in September 2025 and will showcase U.S. beef. In December, Marble is opening its second restaurant in Johannesburg and the flagship item on their menu is Prime grade beef from Snake River Farms. In between these two dates, USMEF is launching an event in Ghana in April 2025 that will be a wonderful opportunity to meet the entire West African trade, says Copeland.
USMEF Latin America Representative Homero Recio addressed recent initiatives to develop new opportunities in South America, including a new product launch in Colombia. Colombia is a growing market for U.S. pork trimmings, hams, loins and ribs. But how does the U.S. grow tonnage, he asked. There are different ways to do it. One is that you just sell more of what you already sell. Another way is to introduce new items and that is what USMEF has been working on with the Boston butt, pork’s best-kept secret, says Recio. The new product with the most immediate potential in Colombia’s foodservice sector may be a pork burger derived from the Boston butt. USMEF has tested the burger in Colombia and the reaction was off the charts. It is now promoting it to the trade as BBB, for Boston butt burger. USMEF is also testing a variation of the burger in Chile, says Recio.
USMEF ASEAN Director Sabrina Yin discussed the diversity of her region and its varying stages of market development, contrasting the highly-developed market of Singapore with emerging markets such as Vietnam and Cambodia. Yin explained that in several ASEAN markets, much of USMEF’s work is directed at overcoming technical barriers and working with the trade on supply chain development, capacity building and imaging U.S. product. Where possible, USMEF continues to utilize sampling programs for U.S. beef and pork toward growing retail shelf space. Yin described how USMEF is evolving to more of a business-to-business approach with promotions and utilizing sales contests for U.S. red meat with importers and distributors.
TYSON BEEF SUFFERS HISTORIC LOSS
TYSON Foods’ beef segment suffered an historic loss in fiscal 2024 and it faces a similar loss in 2025. Tyson Beef reported an operating loss of $381M for the year ended September 30. This went against a loss of $91M in fiscal 2023. This was despite the fact that sales of $20.479 billion were up 1.6% on 2023’s $19.325 billion and that the average selling price was up 4.4%. Beef had an operating loss in the fourth quarter of $71M, versus a $323M 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 CFO Curt Calloway told analysts last Monday. Uncertainties remain, including the timing and pacing of meaningful herd rebuild intentions. These market dynamics are reflected in Tyson’s range of outcomes for operating income for fiscal 2025, where it expects a loss of $400M to $200M. This reflects a similar level of profitability year-over-year at the midpoint, he said. The 2024 loss far exceeded Tyson Beef’s previous largest ever loss of $244M in fiscal 2006. Tyson Beef as recently as fiscal 2022 had operating income of $2.502 billion. But it then had a $9M loss in 2023.
Tyson’s chicken segment in contrast excelled in the quarter and the year. Fourth quarter operating income was $409M versus a $267 M loss a year earlier. Annual income was$988M versus a $770M loss in 2023. Tyson’s prepared foods segment also performed well. Its fourth quarter operating income was $203M versus $118M. Its annual operating income was $879M versus $823M. CFO Curt Calaway attributed the growth in the segment largely to Tyson’s ability to better align supply and demand. Lower input costs, net of pass-through pricing and improved operational efficiencies and execution drove the growth, he said. For the year, chicken annual operating income improved by nearly $1.1 billion, leading to the strongest AOI performance since fiscal 2017.
Tyson delivered significant improvement in profitability for the fourth quarter and full year, said President and CEO Donnie King. It also strengthened its financial position, with solid cash flow generation and a substantial reduction of its net leverage ratio. Looking ahead, Tyson is optimistic about its outlook and ability to deliver long-term value to its shareholders. Tyson’s multi-protein, multi-channel portfolio, combined with its best-in-class team, iconic brands and focus on operational excellence positions it well for fiscal 2025 and beyond, he said.
Choice Prices Signals Good Demand
When Tyson looked at 2024 versus 2023, it saw it from a Choice cutout perspective relative to overall wholesale prices, Group VP of Fresh Meat Brady Stewart told analysts. The cutout was up a little more than 2%, which signals really good beef demand. When it dissects the carcass by primals and by-products, it gets a little bit more interesting as well. It saw flattish prices across the board on ribs and loins. But it has seen a significant increase in the price of the grinds. He is not sure that every single beef product is really a clear substitute with chicken and pork. But where it has seen an increased demand in price has been on lean trim and the grind. It has seen some substitution opportunities between the round and the lean complex as well, he said.
From a retailer perspective, Tyson has seen several different strategies deployed, said Stewart. Because it has seen steady demand for beef, it knows that consumers are going to stay in there and continue to buy beef. Some retailers have taken that promotional opportunity to work on the rib and loin complex to drive those market baskets higher in general. The overarching sentiment relative to beef is really good demand, even with these higher prices, and Tyson expects that to continue into 2025, he said. To have operating costs in its plants that were lower in 2024 versus 2023 when it saw some inflation and some lower headcount numbers is really meaningful to the outlook of its beef business as well and provides some visibility in terms of where it can control the business. This is one of the most dynamic beef environments in history and Tyson has gone through these cycles approximately every decade, he said. But this one is really unique, and it has seen record cutout prices and record carcass weights, he said. More on Tyson’s results on the next page.
Demand Is More Important Than Ever
Tyson needs to continue to understand that the good demand and really high cutout values provide greater importance on its carcass yields than it ever has in the history of the business, said Stewart. There are initiatives to continue to move forward and continually improve in that area. Grind is very important. How Tyson converts lean trim into chubs or patties or their grind material to meet consumers wherever they want to go is a good opportunity for Tyson and it has seen great initiatives and moves in that area, he said.
Tyson wants to provide convenience to its customers and provide different platforms for them to purchase its beef products, said Stewart. Lastly, he wanted to reiterate the efficiency improvements that Tyson has made year-over-year. They are absolutely meaningful and will help Tyson navigate through whether it starts to see additional heifer retention and potentially lower harvest numbers or if it is more a case of static demand, he said.
A securities filing revealed that Walmart Inc. accounted for approximately 18.4% of Tyson’s fiscal 2024 consolidated sales. Sales to Walmart were included in all of its segments. Any extended discontinuance of sales to this customer could, if not replaced, have a material impact on its operations, it said. No other single customer or customer group represented more than 10% of fiscal 2024 consolidated sales. In fiscal 2024, Tyson sold products to customers in approximately 140 countries. Major sales markets include Australia, Canada, Central America, Chile, China, the European Union, the United Kingdom, Japan, Mexico, Malaysia, the Middle East, Singapore, South Korea, Taiwan and Thailand. Its sales to customers in foreign countries for fiscal 2024 totaled $7.8 billion, of which $5.2 billion related to export sales from the U.S.
Pork Results Improve
Tyson’s pork segment had significantly improved results from 2023 but for 2024 still had an operating loss of $40M versus a $139M loss in 2023. CEO King said improved margins highlighted the company’s herd health and continued high demand for products. Sales of $1.438 billion for the quarter were a slight decline from the previous year’s sales of $1.494 billion. Volume for the quarter was up 3.2% but average prices declined by 6.9%. The quarter had a $16M loss versus an $11M loss in 2023. Sales for the year were $5.903 billion compared to $5.68 billion in fiscal 2023, an increase of 2.2%. Pork volume increased 3.8% while the average price declined by 0.7%. Tyson said USDA projects domestic pork production will increase approximately 2% in fiscal 2025 as compared to fiscal 2024. Tyson anticipates an adjusted operating income of $0.1 billion to $0.2 billion in fiscal 2025.
USDA projects that chicken production will increase approximately 3% in fiscal 2025 as compared to fiscal 2024, said Tyson. It anticipates an adjusted operating income of $1.0 billion to $1.2 billion for fiscal 2025. For Prepared Foods, it anticipates an adjusted operating income of $0.9 billion to $1.1 billion in fiscal 2025. Tyson anticipates improved results from its foreign operations in fiscal 2025 on an adjusted basis. It anticipates total company adjusted operating income of $1.8 billion to $2.2 billion for fiscal 2025 and expects sales to be down 1% to flat in fiscal 2025 as compared to fiscal 2024.
King attributed the improvements made in Tyson’s fiscal 2024 financial health over the previous year to increased adjusted operating income and careful management of capital spending. The company’s quarterly capital expenditures over the past year have declined steadily from a high of $589M in the first quarter of fiscal 2023 to $248M in the fourth of fiscal 2024 (a total of just over $1.1 billion in 2024), he said. In the coming year, Tyson expects capital spending in areas that include investments in profit improvement projects, maintenance and repairs to maintain at 2024 levels at approximately $1.0-$1.2 billion, compared to $1.94 billion invested in fiscal 2023, he said.