The Justice Department spent this week asking eight of America's biggest grocers to explain the price of beef. The next day, one of the four packers that handle about 85 percent of American beef said it expects to lose as much as $775 million on it this year.
The letters went out on July 14 and the department announced them on Tuesday — in a post on X. They ask Kroger, Walmart, Costco, Amazon, Publix, Albertsons, Aldi and Ahold Delhaize for their beef pricing strategies, margins and costs going back to 2020. The reason is not obscure. Ground beef averaged $3.95 a pound in December 2020 and $6.89 this July.
Then Tyson Foods cut its forecast on Thursday, for the second time in a month. The beef division's expected loss for the year widened to between $625 million and $775 million, from between $500 million and $650 million four weeks earlier. Tyson blamed margin compression from volatile cattle prices and "one of the most severe cattle shortages in U.S. history."
A packer's problem is that it buys the animal before it sells the meat. Tyson also said falling cattle prices cut the value of live cattle it had already paid for, which means the same quarter hurt on the way up and on the way down. USDA forecasts farm-level cattle prices up 9.9 percent this year and wholesale beef up 9.4. Which looks like pricing power sitting upstream, with whoever owns the herd.
None of that answers the question the department is asking. Tyson's filings show legal contingency accruals of $90 million booked against sales in the first nine months of this fiscal year, and $93 million in the same period a year earlier. A company can lose money on a cattle cycle and still have a pricing problem. Those are separate questions, and an operating loss does not settle the second one.
What the numbers do show is where the money in a meat company now is. Tyson expects its chicken business to earn between $1.85 billion and $1.95 billion this year, and its pork business $200 million to $250 million. Beef is the one going backwards. And the packer at the center of the concentration question is cutting its own capacity — Tyson shut a beef plant in Nebraska, cut shifts at one in Texas, and said in August it would close or sell three more beef sites, rebuilding the network around three plants in the central United States.
The president asked for this investigation in November, and eight grocers now have to explain their margins going back six years. The margin in the middle of the chain, this year, is a loss of up to $775 million. The cows are the part nobody can send a letter to.
The cows are the part nobody can send a letter to.
