Beef processors squeezed by historic cattle shortage
The bear case for beef processors like Tyson Foods is driven by a 75-year low in the US cattle herd, forcing processors to pay high prices for scarce livestock while failing to pass full costs to consumers.
The argument
The speakers argued that meat processors are losing money hand over fist, pointing to Tyson's $150 million quarterly loss in beef processing. This is driven by intense competition for a historically low supply of cattle, while retail prices have not risen enough to offset these costs.
The thesis, stress-tested
✓ What validates it
- ✓Tyson Foods reports continued or worsening losses in its beef segment next quarter
- ✓US cattle inventory reports show no signs of herd rebuilding
▸ Risks discussed
- ▸Retail prices could rise sufficiently to restore processor margins
- ▸Cattle herd liquidation could end sooner than expected
Hear it yourself
"And I do remember, French Baker sending me his elect you know, corner shop, in the outskirts of Paris. Typically, his, electricity bill came around 7 to €800 a month, and it just went from that to about €7,000 a month. Wow. And we have not seen that, but Yeah. Electricity is what really makes the world tick, and and particularly in the service industry, which is really what Yeah. Drives economic growth these days. And that's why the twenty twenty two crisis was so destructive, particularly for an inflationary point of view, because a lot of businesses were receiving electricity bills that they were bankruptcy events."
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