US Beef Packer Margin & Plant Rationalization Model

Supply & Market Inputs

Cattle Inventory Shortage -8.5%

Multi-decade US herd contraction vs baseline capacity

Live Cattle Price ($/cwt) $188.00

Boxed Beef Cutout ($/cwt) $305.00

Base Plant Overhead ($/head) $190.00

Facility Status (Tyson 3-Site Decision)

Gross Packer Spread $145.50 $/head harvested

Capacity Utilization 84.2% Industry Target: >92%

Net Margin ($/Head) -$44.50 Fixed cost deleveraged

Annualized EBITDA Impact -$184.5M Across all active facilities

PACKER MARGIN WATERFALL BREAKDOWN ($/HEAD HARVESTED) NEGATIVE CASH SPREAD

PLANT CAPACITY VS SLAUGHTER CATTLE SUPPLY (HEAD / DAY) Interactive Network Load

Supply Chain Economics: US Beef Meatpacker Spread & Herd Cycles

The Meatpacker Gross Spread Mechanism

Beef packing profitability depends on the "Packer Spread"—the differential between the revenue realized from the boxed beef cutout (plus drop credit for hides and offal) and the cost of purchasing fed live cattle (typically ~1,400 lbs live weight translating to ~880 lbs dressed carcass).

Cattle Cycle & Operating Leverage

Drought conditions and high input costs force severe US cattle herd liquidation. When cattle availability drops to 60-year lows, slaughter plants face extreme fixed cost overhead deleveraging. Operating below 90% capacity utilization rapidly erodes margins into negative territory.

Plant Rationalization Decision (Tyson Foods Case)

To eliminate fixed cost cash burn, processors rationalise capacity by idling or selling older, lower-efficiency harvesting and packaging operations. Closing high-cost sites shifts slaughter volume to remaining plants, driving utilization back towards efficiency thresholds.