Producers slashed the herd to its lowest level in decades due to high feed costs and drought in the western United States, increasing the prices Tyson must pay to buy livestock for processing.

Lower costs for grains fed to cattle and improved conditions for grazing are encouraging factors for increasing the U.S. herd, though high interest rates are a headwind, King said at a BMO Global Farm to Market Conference.

Tyson’s beef business, its biggest segment, suffered an adjusted operating loss of $151 million in the six months to March 30, compared to income of $137 million a year earlier.

Brazil’s JBS, the world’s largest meatpacker, also said on Wednesday that it continues to see reduced cattle availability in the United States and demand constrained by higher beef prices.

Improvements in Tyson’s chicken business are offsetting difficulties in beef, King said, after it shut six U.S. chicken plants since the start of 2023. Poultry diseases and other issues are constraining U.S. chicken production, he said.

“We see today the industry trying to supply more birds but there’s been a little bit of bumping our heads against the ceiling,” said John R. Tyson, chief financial officer. That is “constructive for chicken margins,” he added.

Feed is generally the biggest cost for raising poultry, and corn and soy prices hit three-year lows this year. Farmers are now planting crops that will be harvested in the autumn, after a record corn harvest in 2023.

“Even though we’re still early in the planting season, I think everyone is comfortable and confident about where production is headed this year,” John R. Tyson said.

“It’s possible that we’re getting back into those pre-Covid levels or 10 years ago, where corn was trading $4 minus, as compared to where we were a year ago, above $6.”

Chicago Board of Trade December corn futures CZ24 traded just below $5 per bushel on Wednesday.

—Additional reporting for Reuters by Granth Vanaik in Bengaluru

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The proposed settlement in Minnesota federal court was disclosed on Friday from plaintiffs’ lawyers representing a class of businesses that bought beef for food preparation since 2015.

It is the second deal that the Brazilian beef giant and its U.S. units have struck in the case, after they agreed last year to pay US$52.5 million to grocers and other plaintiffs that make up the “direct” beef purchaser class.

The new settlement, subject to a judge’s review and approval, requires JBS to co-operate in ongoing cases against corporate defendants that have not settled, including Cargill and Tyson Foods.

“This co-operation is valuable and will afford access to transactional data, documents, witnesses, and other information without further litigation and expensive discovery — a significant class-wide benefit,” the plaintiffs’ lawyers said in their request for preliminary approval of the deal.

JBS and lawyers for the company on Monday did not immediately respond to messages seeking comment. JBS denied liability as part of the settlement.

Lawyers for Cargill and Tyson and representatives from the companies either declined to comment or did not immediately respond to messages seeking comment.

JBS and other suppliers were sued in a series of cases alleging price-fixing in various meat markets. JBS has paid tens of millions of dollars to resolve claims from pork purchasers.

In the beef case, commercial plaintiffs including Wisconsin-founded sandwich and soup shop Erbert + Gerbert’s alleged JBS and other meat packers conspired since 2015 to fix the prices of beef.

The plaintiffs’ lawyers said the settlement was “the product of extensive and vigorous arm’s-length negotiations.”

— Mike Scarcella is a legal affairs reporter for Reuters in Washington, D.C.

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“At a time of high inflation, it is unacceptable to make the price of beef even more expensive than it already is,” Sylvie De Bellefeuille, a lawyer for Option Consommateurs and the representative plantiff in the proposed suit, said in French in a release Tuesday.

The organization, a Quebec-based consumer protection group, said its lawyers filed an application last Thursday in the provincial Superior Court’s Montreal district for leave to bring a class action. At time of writing, the suit had not yet been authorized and its allegations have not been proven.

Option Consommateurs alleges Cargill, JBS, Tyson Foods and National Beef Packing Co., which control the lion’s share of both the Canadian and U.S. beef markets, have “reportedly been plotting at least since 2015 to fix the price of beef.”

Anyone who has purchased beef in Quebec since Jan. 1, 2015 would form part of the class in this case, the group said.

The suit may be inspired by a similar case recently settled in the U.S., said Sylvain Charlebois, a food systems analyst with Dalhousie University.

JBS last month said it would pay US$52.5 million to settle litigation accusing meat-packing companies of conspiring to limit supply in the U.S. beef market in order to inflate prices.

Reuters quoted JBS at the time as saying the company did not admit liability but found settling that suit was in its best interest and would still defend against beef price-fixing claims by other plaintiffs.

The settlement came a month after U.S. President Joe Biden announced a plan to stop alleged “exploitation” in the meat sector.

In the U.S. suit, JBS, Cargill, National Beef and Tyson had been accused of conspiring since 2015 to create supply shortfalls.

“It’s a very bizarre lawsuit,” Charlebois said of the Quebec suit.

Grocers are excluded, he said, which implies only the packers were colluding with no other beneficiaries. However, transactions are mostly between grocery stores and consumers.

He doesn’t know how they’ll determine the specific prices grocers paid, Charlebois said.

However, he said, it’s not unwarranted for consumers to be wary of big food companies. “There is baggage created by the bread-price fixing scandal back in 2017.”

Loblaw and its parent company George Weston Ltd. that year admitted they’d been involved in a scheme to artificially raise bread prices between the early 2000s and 2015.

Class action suits are in progress in Ontario and Quebec against Loblaw and alleged co-conspirators, according to a Jan. 7 report from the Globe and Mail.

In 2017, Loblaw offered $25 gift cards as compensation to customers. However, the price of bread doubled during the period of alleged price fixing — outstripping food inflation significantly, Maclean’s writer Jason Markusoff and market analyst Kevin Grier wrote in 2018.

If a household was buying one loaf of bread a week, they wrote, the excessive price increase cost about an extra $370 between 2002 and 2015.

The beef lawsuit may spill into the rest of Canada, said Charlebois. It may also be the first of many lawsuits targeting other products. Food prices are high and people are skeptical, he said.

“If a consumer out there is skeptical, he or she has every right to be skeptical given what has happened in recent years,” Charlebois said.

— Geralyn Wichers is a reporter for the Manitoba Co-operator.

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The independent investigation, led by former U.S. Attorney General Eric Holder, came in response to a lawsuit filed by the son of a worker at a Tyson facility in Waterloo, Iowa, who died in April of complications from the virus.

The lawsuit claimed that plant managers misled workers about COVID-19, bet on workers catching the virus and allowed sick employees to continue working.

Tyson in November suspended the employees accused of wagering at the Waterloo facility — its largest U.S. pork plant.

The COVID-19 pandemic has ravaged the meatpacking industry, infecting thousands of workers at slaughterhouses hit by outbreaks.

Tyson on Wednesday separately idled another of its Iowa pork plants following a mechanical malfunction in its refrigeration system.

Operations at the Columbus Junction facility could be halted for a few days for repairs, the company said, adding that no one was hurt in the malfunction.

— Reporting for Reuters by Uday Sampath in Bangalore.

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The guilty plea makes Pilgrim’s Pride, mostly owned by Brazilian meatpacker JBS, the first U.S. chicken company to reach an agreement with the government over allegations that industry executives conspired to increase chicken prices from 2012 through 2019.

Pilgrim’s Pride agreed to plead guilty to one count of conspiracy to limit competition in chicken product sales, according to a Securities and Exchange Commission (SEC) filing. A company statement said the agreement covered three chicken contracts with one U.S. customer.

As part of the deal, the department’s antitrust division will not bring more charges against Pilgrim’s Pride in the case, the statement said. Shares jumped 6.1 per cent to $16.63 on Wednesday afternoon (all figures US$).

“We are encouraged that today’s agreement concludes the antitrust division’s investigation into Pilgrim’s,” CEO Fabio Sandri said.

The antitrust division confirmed it reached a plea agreement with Pilgrim’s Pride and declined further comment until the deal is filed. It is subject to the approval of the U.S. District Court of Colorado.

The former CEO of Pilgrim’s Pride, Jayson Penn, was indicted in June, along with other current and former industry executives, on charges of seeking to fix chicken meat prices. Penn has pleaded not guilty.

Last week, the government broadened the probe by indicting more industry executives, including Bill Lovette, who preceded Penn as CEO of Pilgrim’s Pride.

Rival supplier Tyson Foods said in June it was co-operating with the department’s investigation under a corporate leniency program that could protect the company from criminal prosecution.

Separately, JBS said it will pay a $26.9 million fine after making a deal with the SEC over violations related to Pilgrim’s Pride’s books, and prosecutors said JBS parent J+F Investimentos will pay $256 million after pleading guilty to violating the U.S. Foreign Corruption Practices Act.

–– Reporting for Reuters by Rama Venkat in Bangalore, Tom Polansek in Chicago and Diane Bartz in Washington.

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In June, the Justice Department indicted Pilgrim’s Pride CEO Jayson Penn and three others in its first charges in the criminal probe involving broiler birds, which account for most U.S. chicken.

Court documents filed Tuesday show former Pilgrim’s Pride CEO William Lovette has also been indicted. Lovette could not be reached for comment Wednesday, and a company spokesman did not respond to a request for comment.

The indictments come after grocers, retailers and consumers filed a lawsuit accusing Pilgrim’s Pride, Tyson Foods and other poultry processors of conspiring to inflate prices for broiler chickens.

“Executives who choose collusion over competition will be held to account for schemes that cheat consumers and corrupt our competitive markets,” Makan Delrahim, chief of the Justice Department’s antitrust division, said in a statement Wednesday.

Penn, who succeeded Lovette as CEO in 2019, has pleaded not guilty.

Pilgrim’s Pride, mostly owned by Brazil-based meatpacker JBS, last month said Penn left the company and was replaced as CEO by chief financial officer Fabio Sandri.

The court documents allege industry executives conspired to fix chicken prices from 2012 through 2019.

Also indicted was sales executive Timothy Mulrenin.

Mulrenin, who was hired by Perdue Farms in 2018, worked at Tyson Foods at the time of the allegations outlined against him in court documents, according to the filing and his LinkedIn page. He did not immediately respond to a message sent through LinkedIn.

Perdue declined to comment.

Tyson in June said it was co-operating with the Justice Department’s investigation under a corporate leniency program that could protect the company from criminal prosecution.

The latest indictment does not affect Tyson’s status in its leniency application, spokesman Gary Mickelson said.

— Reporting for Reuters by Tom Polansek in Chicago and Diane Bartz and Susan Heavey in Washington.

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Meat processors such as Tyson, WH Group’s Smithfield Foods and JBS USA temporarily closed about 20 slaughterhouses last month as workers fell ill with the new coronavirus, leading to shortages of certain products in grocery stores. Production remains lower than normal because of increased absenteeism and social distancing among employees.

An Iowa state official said 555 employees at Tyson’s Storm Lake plant tested positive for the virus, about 22 per cent of the workforce.

Tyson will stop slaughtering hogs at the facility and will finish processing the animals over the next two days, according to a statement.

It will resume operations next week following “additional deep cleaning and sanitizing of the entire facility,” the statement said. The closure is due partly to a delay in COVID-19 testing results and employee absences, according to Tyson.

Tyson said it conducted large-scale COVID-19 testing at the plant in northwestern Iowa, about 110 km east of Sioux City, and implemented safety measures to protect employees, such as requiring them to wear masks.

The United Food and Commercial Workers (UFCW) union called on the Trump administration and meat companies to do more to protect workers. The union reported more than 3,000 infections and 44 deaths among U.S. meatpacking workers, up from 35 deaths as of May 12.

“Too many workers are being sent back into meatpacking plants without adequate protections in place, reigniting more outbreaks in the plants and our communities,” said Nick Nemec, a South Dakota farmer who is part of an advocacy group working with the union.

The Storm Lake plant slaughters about 17,250 pigs a day when it is running at full capacity, according to industry data. That accounted for about 3.5 per cent of U.S. production before the pandemic.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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Tyson said Wednesday it was closing two pork processing plants, including its largest in the U.S., further tightening meat supplies following other major slaughterhouse shutdowns.

The unit, Tyson Fresh Meats, said it was working with local health officials to test more than 1,400 workers at the Pasco plant, which produces enough beef in one day to feed four million people.

The closures are adding to stress on farmers as lockdowns prevent them from getting their produce to consumers.

Tyson said workers at the Pasco plant have been asked to self-isolate at home until test results return and they will continue to be compensated while the facility is closed.

— Reporting for Reuters by Uday Sampath in Bangalore.

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Futures prices for cattle have tumbled during the outbreak, worrying farmers as the U.S. economy heads into a downturn and fueling questions about whether the market run by CME Group is an effective tool for risk management.

Senator Charles Grassley of Iowa wrote on Twitter that U.S. Department of Agriculture, Department of Justice and Commodity Futures Trading Commission probes may be needed to determine why ranchers did not benefit from soaring meat demand.

“Beef is flying off grocery shelves but farmers are seeing prices go down,” Grassley said. “If packers are illegally manipulating markets during crisis, we need USDA & DOJ & CFTC to investigate + help farmers. Four companies control 80% of market & they’re taking advantage.”

Processors’ margins leapt to more than $600 per head of cattle last week, HedgersEdge.com said (all figures US$). But cattle producers are operating at a net loss, four U.S. senators from South Dakota, North Dakota and Montana told the justice department in a letter that called for a price-fixing investigation.

Cargill said it is a committed buyer in the cash market for cattle, which was less impacted than futures. Tyson said it wants cattle producers to succeed and paid them a premium last week.

“This is an uncertain and unprecedented time, where food service beef demand has come to an immediate and virtual standstill, while retail demand has increased,” Tyson said.

USDA said it was working with CFTC to ensure transparency and integrity in agricultural markets.

Live cattle futures dropped 3.5 per cent on the Chicago Mercantile Exchange over the last three weeks amid worries the virus would shut slaughterhouses, while prices for beef that meat companies ship to wholesale buyers jumped about 20 per cent.

Futures sank as managed funds liquidated long positions, or bets prices will rise, said Cassie Fish, a beef expert who formerly worked for Tyson. It was the market’s biggest event-driven decline in more than 45 years, she said.

“They decided to get out,” Fish said. “It was like a stampede.”

Farmers and processors use futures to offset the risk of producing meat, and futures are intended to reflect the underlying cash market. April cattle futures ended last week at a record $18-$19 under the cash market, according to consultancy AgResource.

CME Group said it is committed to improving its livestock markets.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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Companies such as Tyson Foods and Cargill want to ensure their slaughterhouses remain supplied with cattle to chop into beef and employees to perform the sometimes grueling work.

Their products are in high demand as shoppers have emptied grocery stores of meat to fill their refrigerators and freezers during a time of “social distancing” to help contain the highly contagious respiratory virus.

Tyson said it would pay farmers a one-time premium on cattle slaughtered this week, after facing objections over the company’s soaring profits.

“This is an unprecedented time and the intent of our response is to show our support in an effort to help our supply partners weather this extraordinary situation,” Tyson said.

Tyson declined to disclose the size of the payments. They are $5/cwt for live cattle and $7.94/cwt for dressed cattle, according to cattle producers.

“They help but they’re not going to make whole the losses we’re taking,” said Lee Reichmuth, a Nebraska cattle producer and board member for the U.S. Cattlemen’s Association.

Margins for U.S. beef processors like Tyson hit a record high of about $580 per head of cattle on Monday, up from about $170 a week ago, according to livestock marketing advisory service HedgersEdge.com.

Margins climbed as prices for cuts of beef that companies ship to wholesale buyers jumped about 20 per cent in the past two weeks. April live cattle futures prices fell about 7% over the same period as traders worried that the virus could shut slaughterhouses.

U.S. Agriculture Secretary Sonny Perdue said in a tweet that the agency was monitoring agricultural markets. He tagged just two commodities in his post — #cattle and #beef.

“We are paying special attention to the difference in prices from the farm gate to the grocery shelf,” Perdue wrote.

U.S. beef processors increased their slaughter last week to an estimated 653,000 cattle from 633,000 a week earlier and 636,000 a year earlier, according to the USDA.

Cargill will pay U.S. and Canadian slaughterhouse workers a premium of $2 an hour until May 3, with a bonus of $500 to those who complete weekly shifts over a period of eight consecutive weeks, according to the company.

Maple Leaf Foods, Olymel and Hormel Foods also said they would be giving employees temporary pay increases or bonuses.

— Reporting for Reuters by Tom Polansek in Chicago; additional reporting by Rod Nickel in Winnipeg.

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