WSJ Challenges The “Big Meat Conspiracy Theory”
Tyson Foods reported last week that its beef unit generated no operating income during the second quarter ended April 1 and just $8 million on an adjusted operating basis. For the quarter, Tyson’s margin was 0.2% compared to 12.7% during the same period last year. Those numbers are significantly less than the 2% to 4% the company forecast at the beginning of the year.
Tyson President and CEO Donnie King told investors the beef market is cycling out of historically strong margins the industry enjoyed in 2021 and 2022. Beef volume sales and average prices declined 2.9% and 5.4% respectively, compared to the second quarter last year.
Noting Tyson reported its first quarterly loss since 2009, The Wall Street Journal, in an editorial published Monday, May 15, 2023, asked: “Remember when President Biden and progressives last year accused meat packers of colluding to fatten their profits? Are they now conspiring to lose money?”
The WSJ suggests to President Joe Biden the sudden turn-around in Tyson’s balance sheet is a “lesson in market economics.”
“Tyson’s stock plunged after it reported anemic sales and downgraded its forecast,” The WSJ editorial board wrote. “The quarterly loss at the largest U.S. meat supplier marks a stunning reversal from 2021 and early last year when it earned record profits amid a run-up in meat prices. What happened?
“Well, meat supply increased as packers ramped up production and increased wages for employees to meet demand. But producer costs for cattle and chicken have remained elevated. At the same time, consumer demand for pricier cuts of beef and pork has declined as inflation ate into purchasing power. All of this has shrunk Tyson’s margins.”
The WSJ also noted the president claimed rising meat profits reflect “the market being distorted by a lack of competition” and “capitalism without competition isn’t capitalism; it’s exploitation.”
Noting that Tyson’s stock has fallen by “nearly half over the past year and is trading at the lowest levels since 2015," The WSJ editors wrote, “This doesn’t look like an antitrust conspiracy or market oligopoly.”
In late April, Reuters reported Tyson told employees it would eliminate 10% of its corporate jobs and 15% of its senior leadership positions. The layoffs are an attempt to cut costs as the company expects beef profit margins to return to more normal levels after historic profits in 2021 and 2022.
