00:00Tyson has really been a very interesting story over the last couple years.
00:04We've definitely seen a lot of slimming down in terms of their capacity.
00:09Basically, the U.S.'s beef packers are in the situation where, because we are so short on cattle,
00:15they've been paying very high prices for the animals that they process.
00:19And they've been able to pass on some of those price increases to their customers,
00:24which are largely large retailers.
00:25But we've seen significant drops in those volumes.
00:28And so quarter after quarter, since pretty much the start of 2024,
00:32they've been reporting significant operating losses.
00:36And with this latest batch of quarterly earnings that they just reported,
00:40I think people have been hoping to see some of the benefits of closing that one plant in Nebraska earlier
00:46this year.
00:47But it really seems like that wasn't enough.
00:50They cut their profit outlook and deepened their estimate for their beef segment operating losses.
00:56And so I think they decided that there were just more actions that still needed to be taken.
01:02Well, prices just keep going up, Eileen.
01:04I was looking at this.
01:04It's not just the prime ribeye that, you know, you want to put on the grill later today.
01:09Ground beef up 25 percent since the beginning of 2025.
01:14Beef prices overall up 12 percent year over year.
01:17Should we expect them to go higher?
01:20It's really hard to say.
01:21I think right now we are sort of in like what is described as like the peak of grilling season,
01:26which runs from like Memorial Day to Labor Day.
01:30So this tends to be a very strong period for seasonal demand.
01:34But some of the early data that we've seen coming out from July 4th
01:38has actually revealed a little bit more pushback from consumers than the industry expected.
01:43Not that consumers aren't buying beef, but it seems like this may be the highest price point
01:49they're willing to pay.
01:50That being said, even if demand like flat lines a little, supply still remains fundamentally tight.
01:57The latest data we saw from the USDA really still shows the cattle herd very close to the
02:02it's near five decade low.
02:05And the process of rebuilding takes several years and also actually requires supplies to be
02:11a little bit tighter before they get better.
02:13So I don't think we'll see a significant drop in prices soon.
02:17We're going to get to why there might be some relief when it comes to supply in just a moment.
02:22But Tyson versus some of the other companies and the other producers,
02:26how are they handling the shortage?
02:29Kind of the same.
02:30Pretty much everyone has done some sort of pullback in capacity just to make it a little bit easier to
02:36operate.
02:37JBS did a similar move earlier.
02:39All of these businesses so far have been really relying on other segments of their business
02:44to stay profitable.
02:46So their chicken business in particular has been doing pretty well just because consumer
02:50demand there has been very strong, sort of allowing for continued year over year growth.
02:55We've had a couple of sort of oddball impacts that like the screw worm was a big story earlier
03:02this year.
03:02I hate to do that while you're eating breakfast on Sunday, but also the lack of imports from
03:07Mexico.
03:08Both of those could turn.
03:09Could that bring some relief for the months ahead?
03:13Yeah.
03:13The meatpackers have been talking for a long time about that source of supply from Mexico as
03:18like the biggest immediate thing that could help eat supplies.
03:21So we basically used to import a million head of cattle.
03:25And to be clear, those are live cattle as opposed to like beef imports.
03:30And those are brought into the U.S.
03:32Those animals are raised in the U.S. for some time before being processed into meat.
03:36But that trade has been pretty much on and off, like largely off since like November 2024
03:42or so, just due to the spread of this like New World screw worm, which like if it gets
03:48to animals, it infects wounds and can be very deadly if not treated.
03:52It did finally make its way to the U.S. earlier this year in June.
03:57And so I think the risk calculus was we have been able to manage the spread.
04:02There are very few active cases currently in Texas now.
04:05So those imports from Mexico are expected to start in the end of this month with one port
04:13in Arizona.
04:14It's not the biggest port.
04:16So hopefully that reopening goes well, such that the USDA will open other ports and we'll
04:22see more significant flows.
04:24But that one port alone, I don't think necessarily will make a large national difference, though
04:30definitely I think regional meatpacking plants should hopefully start to see some reprieve
04:34soon.
04:35Eilina, before we wrap up here, you know, they're shutting down plants.
04:38Is it, though, with the anticipation that eventually they'll reopen them?
04:41Or I am curious that once you shut them down, do they stay down and what that means for
04:46overall future meat supply here in the U.S.?
04:49Yeah, that's the really difficult thing.
04:52The U.S. cattle herd is super cyclical.
04:54So like a decade ago when we went through a similar cycle, we also saw meatpacking plants
04:58close.
04:58It's largely the case that unfortunately they don't come back, which tends to have a very
05:03large community economic impact.
05:05The meatpackers tend to offset that by making their existing plants more efficient.
05:10But the USDA, also very conscientious of this, has announced like a $500 million investment
05:17into mid-sized beef processors specifically so that they might be able to weather these
05:23high cattle costs for a little longer instead of folding.
05:27Makes you think about the community impact, though.
05:29I think as we count down to the midterms, all of these things, right?
05:32You shut down plants.
05:33People potentially lose jobs.
05:34And there's certainly...
05:35Just another inflationary input.
05:36Right, and another economic impact.
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