Tyson Foods Inc. is lowering some wholesale beef prices in response to high meat costs during the pandemic.
The Springdale-based company, which processes about one-fifth of the nation's beef, plans to reduce prices for ground beef, roasts and other beef products by as much as 20% to 30% for sales made this week to restaurants, grocery stores and other customers. The plan was first reported by The Wall Street Journal.
Beef accounted for more than a third of Tyson's $42.4 billion in sales last year. About half of the company's beef is sold to grocery stores and food retailers, the Journal reported.
Tyson spokesman Gary Mickelson said these discounts will not only help to the company's customers and consumers, but many of its cattle suppliers.
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"The objective is to help maintain beef consumption as our plants return to more normal levels of production and work through the backlog of available cattle," he said in an email Thursday.
Since early March, coronavirus outbreaks have closed at least 30 meatpacking plants at some point, infecting thousands of workers. The closures and slowdowns have displaced millions of pounds of meat, but several beef, pork and chicken plants are on track or set to reopen with reduced slaughter rates after a U.S. executive order was signed to keep the industry operational through the pandemic.
The U.S. Department of Agriculture estimated that production of beef, pork and other red meat last week was about 28% lower compared with the same period a year ago. The agency cut its 2020 production forecasts this week.
Grocery stores and restaurants are paying more for food as a result. Ground beef on Thursday sold for as high as $6.75 a pound, according to the USDA, more than triple the cost in March. Some steaks have doubled in price over the past two months.
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"That's smart," Jason Apple, a professor of meat science at Texas A&M University, Kingsville, said about Tyson's plans. As restaurants begin to open in several states with reduced seating capacity, he said the owners want to have enough supply for when customers step through the doors.
"Food costs are the largest out-of-pocket expense," Apple said. "If you can reduce some of that by 30%, it will be a very good stimulus for businesses."
The beef system has come under fire from cattle producers who have watched future prices decline as much as 30% since the first of the year, as consumers pay more for beef. Federal investigations seeking possible antitrust behavior among Tyson and other beef packers are underway.
Historically, about 45% of Tyson's sales have come from retail stores and 40% from restaurant and other food service establishments. The company has seen retail sales comprise two-thirds of its total sales in recent weeks as shoppers make the bulk of their food purchases at grocery stores, Tyson President Dean Banks said in an earnings call this month.
Tyson has taken steps to help workers and suppliers during the pandemic, including paying bonuses to plant workers and a temporary premium to cattle suppliers in late March.
Farmers are cutting their losses as the supply chains are upended, however. Apple said many are dumping milk, culling hogs and leaving cattle out to pasture. He said he has heard of cattle slaughter dates pushed back to as late as February of next year.
As a result, he said several enthusiasts are interested in opening small meat processing shops to handle the current backlog.
Business on 05/15/2020