Rising Beef Costs Pinch Producers, Retailers and Restaurants Alike

Escalating cattle prices are straining every stage of the U.S. beef supply chain, from slaughterhouses to steakhouses, forcing companies to cut capacity, reassess earnings forecasts and raise menu prices while attempting to preserve consumer traffic.

Tyson shutters Nebraska plant amid shrinking herd

Tyson Foods Inc. plans to close its Lexington, Nebraska, beef facility in January, eliminating roughly 3,200 jobs. The company announced the move on Nov. 21 as part of an effort to “right-size” its beef operations in response to the historically small U.S. cattle herd. Production will shift to other Tyson plants, but management warned on a Nov. 10 earnings call that higher cattle acquisition costs could drive a loss of up to $600 million in beef operations during the next fiscal year.

Cattle prices near record territory

Live cattle futures have climbed about 18% in 2023, recently trading near $2.29 per pound. Prices had surged nearly 170% from the pandemic low of roughly 92 cents to an all-time high of $2.48 per pound in mid-October. Although futures retreated 16% to $2.18 in late November, they rebounded almost 5% in December. Even after the pullback, cattle remains markedly higher than the pre-pandemic level of around $1.20 per pound recorded in late December 2019.

Rising wholesale costs are reaching consumers. Supermarkets and warehouse clubs such as Costco have raised retail beef prices, while casual-dining chains confront the challenge of offsetting cost inflation without deterring diners.

Texas Roadhouse walks a pricing tightrope

Texas Roadhouse Inc.—parent of the Texas Roadhouse, Bubba’s 33 and Jaggers brands—reported a third-quarter restaurant margin of 14.3%, 1.68 percentage points lower than in the same period last year. It marked the company’s third consecutive year-over-year margin decline, driven by commodity inflation and higher wages.

Management has limited menu price increases to preserve sales momentum, imposing a 1.4% bump at the start of the second quarter and another 1.7% in the fourth quarter. The strategy helped comparable restaurant sales rise 6.1% in the third quarter, the company’s strongest result of 2023, powered by a 4.3% increase in traffic and a 1.8% higher average check.

Nevertheless, executives in November raised full-year 2025 commodity inflation guidance to 6%, up from the 3%–4% outlook provided in February, and projected 7% inflation for 2026. Investors will learn how fourth-quarter beef costs affected results when Texas Roadhouse reports earnings, expected in February.

Market reaction and analyst moves

Texas Roadhouse shares have fallen roughly 15% from their 52-week peak near $200 reached in May, although they set a record closing high of $205 in November 2024. The pullback drew interest from some investors: on Dec. 17, Wells Fargo upgraded the stock to “overweight” and lifted its price target to $195 from $170. Jim Cramer’s CNBC Investing Club also added to its position the same day.

Imagem: Internet

Structural supply constraints

Years of regional drought have left the U.S. cattle herd at its smallest level in decades. Limited feed supplies forced many ranchers to liquidate animals they could no longer afford to maintain. Because a typical production cycle spans about three years—from breeding to feedlot—rebuilding the herd is inherently slow.

In an attempt to ease supply pressures, President Donald Trump last month signed an order cutting tariff fees on Brazilian food products, including beef and coffee, by 40%. The measure also exempted certain agricultural imports, such as beef, from higher tariffs and expanded quotas through new trade agreements with Latin American partners including Argentina. Industry specialists are doubtful that increased imports will materially expand domestic supply and warn that the policy could discourage producers from restocking cattle.

Revised government outlook

The U.S. Department of Agriculture recently trimmed its 2026 cattle price projection to reflect the impending Tyson closure and lower import tariffs, yet still anticipates a 5% year-over-year increase. Additional analysis from USDA—including herd inventory data and long-term price forecasts—is available on the agency’s official website.

Market analysts caution that uncertainty over policy direction and plant capacity may prompt ranchers to delay expansion plans, potentially prolonging tight supplies and elevated prices across the beef market.

Crédito da imagem: CNBC