The U.S. Department of Agriculture decision is a victory for meat companies and industry associations such as the National Chicken Council, which have advocated for faster processing line speeds.

However, it adds to health concerns about slaughterhouse workers, who often perform repetitive tasks with sharp knives and toil in extreme heat or cold.

USDA will start a process to make permanent higher speeds that it allows at some facilities under waivers, according to a statement. Chicken plants with waivers can process up to 175 birds per minute, compared to a previous limit of 140 birds.

The agency also will extend waivers, allowing facilities to “meet demand without excessive government interference,” the statement said.

USDA’s announcement cited a lack of direct links between processing speeds and workplace injuries, but research shows that meatpacking workers face a greater risk of serious harm.

Worker unions and other advocacy groups have long argued that greater speeds threaten food safety and pose a higher risk of stress injuries and accidents for workers. Immigrants and undocumented workers often fill meatpacking jobs.

“Increased line speeds will hurt workers – it’s not a maybe, it’s a definite,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, which represents 15,000 poultry workers.

In his first term, President Donald Trump in 2019 issued a rule that allowed pork plants to run processing lines as quickly as they wanted. A federal judge blocked the rule in 2021 after a challenge from worker unions.

The Biden administration in 2023 allowed six pork plants to operate faster in a trial program for which USDA collected data on worker injuries.

Making the higher speeds permanent will increase stability for pork producers, the National Pork Producers Council industry group said.

USDA-funded data, released in January, found pork and chicken plant workers face higher risks than other manufacturing workers for musculoskeletal disorders, such as carpal tunnel syndrome.

Among six pork plants, higher line speeds were associated with greater risks for workers at one plant and lower risks at another, while line speeds did not make a statistically significant difference at four facilities, according to the data.

There was no association between greater speeds and higher risks for poultry workers, the data showed.

Data from the Bureau of Labor Statistics indicate occupational illness cases reported in the animal slaughtering and processing industry were six times higher than the average for all industries in 2022.

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Performance there compensated for the slump in the Beef USA division, which accounts for about a third of JBS’ revenue, the company’s second-quarter results showed.

JBS reported a net profit of 1.72 billion reais (C$432.3 million) for the quarter.

While the company missed forecasts by LSEG analysts, who had predicted a net profit of 2.02 billion reais, it returned to a profit after a net loss the same quarter a year earlier.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA), a measure of operating income, were 9.88 billion reais for the quarter from April to June.

Gilberto Tomazoni, global chief executive officer of JBS, said in an interview that the results were boosted by favorable supply and demand dynamics, as well as lower prices of grains for animal feed and operational improvements.

Tomazoni added that the company’s processed food, poultry and pork unit in Brazil, Seara, had overcome past operational challenges, and while improvements had been incorporated, more adjustments would be made.

“It still has potential,” he said. “Now, with the incorporation of commercial issues, pricing, mix management, distribution management, we can do even better.”

Tomazoni said the dual share listing plan was still an important strategy for the company to unlock value in the U.S., one of its biggest markets. It is pending authorization from the U.S. Securities and Exchange Commission (SEC).

“When we have SEC approval for the registration, we’ll call the shareholder meeting and put it to a vote,” he said, adding that executives were still in talks with SEC officials.

While exports to China were down, he said those to other destinations, such as the United States, Chile and the Middle East, were holding up.

“Brazil’s animal processing volumes grew significantly, and domestic consumption was greater than exports,” Tomazoni said.

JBS increased free cash generation to 5.5 billion reais in the second quarter, which gave room to deleverage debt.

Guilherme Cavalcanti, chief financial officer, said reduced debt meant the company could maintain its growth plans.

Total revenue, for the first time, exceeded 100 billion reais in a quarter.

—Additional reporting for Reuters by Andre Romani

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The Arkansas-based meatpacker reported second-quarter sales that fell short of analysts’ estimates, though profits surpassed expectations.

Third-quarter results could be weaker than the fourth quarter due to performance in Tyson’s pork and prepared foods divisions, CEO Donnie King said on a conference call. Shares fell 7.9 per cent after tumbling earlier by more than nine per cent.

“Historically, FQ3 is typically the strongest from a seasonal perspective,” said Arun Sundaram, analyst with CFRA Research.”The outlook was viewed as a disappointment.”

High commodity costs could weigh on third-quarter results in prepared foods, said Melanie Boulden, the unit’s president. She added that inflation is pressuring consumers, particularly those from lower-income households, at retail stores and food-service outlets.

“Uncertainties remain around consumer strength and behaviour,” Chief Financial Officer John R. Tyson said.

He later sought to calm investor concerns over the third quarter outlook as shares sank, saying executives “don’t want anyone to over-read into that.”

Tyson has shuttered six U.S. chicken plants since the start of 2023, eliminated corporate employees and announced plans to close a pork plant, in an attempt to boost results and rein in costs.

Improvement in the chicken business on Monday prompted Tyson to lift its estimate for total adjusted operating income in fiscal year 2024 to $1.4 billion to $1.8 billion from $1 billion to $1.5 billion.

The increased forecast and quarterly earnings were not overly surprising, Citi Research analyst Thomas Palmer said.

Adjusted second-quarter earnings were 62 cents per share, above analysts’ expectations for 39 cents, based on LSEG data.

Tyson has worked to turn around its chicken business for years but struggled with excess supply in 2023. Adjusted operating margins were 3.9 per cent in the latest quarter, compared to negative 3.7 per cent a year earlier, as feed costs fell.

Tyson raised the chicken unit’s income outlook in the first such increase after the second quarter in seven years, JP Morgan said in a note.

Quarterly sales slid 8.3 per cent while volumes dropped 6.1 per cent, largely due to reduced U.S. production, according to Tyson. Producers are grappling with elevated chicken deaths and disease, King said.

“We’re not where we need to be yet in our chicken business,” he said.

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Blizzard-like conditions had left meatpacking workers stranded on highways on Monday while others spent the night at the slaughterhouses where they work, the companies and state officials said.

Disruptions at plants slashed beef production at a time prices remain high after U.S. ranchers reduced their herds. Nationwide, meatpackers slaughtered an estimated 94,000 cattle on Tuesday, down 25 per cent from a week earlier, the U.S. Department of Agriculture said.

Cargill, a major producer of ground beef, said it idled a plant in Dodge City, Kansas, due to snow, cold and a loss of power. The plant will re-open once power returns and conditions are safe, which could come as early as Wednesday, the company said.

Cargill is “committed to minimizing any disruption” to customers, spokesman Chuck Miller said. He confirmed that “some employees got stuck on the road outside the plant” and said the company hired tow truck drivers to assist them.

About 50 employees out of 2,850 stayed at Cargill’s plant due to road closures, while the majority “made it home,” Miller said.

“Half of our plant has had power and heat for a majority of the winter storm, and everyone has had access to food, water and assistance,” he said.

In the eastern half of the U.S., wintry weather knocked out power to over 418,000 homes and businesses in 12 states.

Tyson Foods said it canceled both shifts at its sprawling beef plant in Holcomb, Kansas, after allowing some workers the option of “sheltering in place” there with a hot meal and drinks on Monday night. Employees were able to leave by Tuesday morning, the company said.

The winter storm left about 60 to 100 vehicles stuck on roads near Cargill’s plant on Monday, and others stranded near Tyson’s facility, said Steve Hale, spokesman for the Kansas Department of Transportation. The department advised Cargill on Monday that highways were being closed, he added.

“The roads are already treacherous and now we’ve got lots of vehicles that are all over the place, either stranded or waiting to get in or out of these plants,” Hale said.

Outside of Tyson’s plant, a highway resembled a parking lot with vehicles left overnight in the middle of the road and on the shoulder, said Trooper Anthony Calderon of the Kansas Highway Patrol.

“It looked like you were at the mall,” he said.

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JBS in a securities filing offered a one-time dividend payment of about 2.2 billion reais (C$621 million) to coax investors into backing the longstanding plan.

Shareholders will decide whether to accept the proposal at a general meeting yet to be scheduled.

JBS global CEO Gilberto Tomazoni said it is possible that the meeting will take place in 30 days. He believes that by December all steps to complete the transaction will have been taken so that the company’s shares can start trading in New York.

The proposed structure will use a Netherlands-based vehicle called JBS NV and have Class A shares with one voting right and Class B shares with 10 votes, JBS said. JBS NV’s class A common shares would trade in the U.S. and Brazilian depositary receipts would be listed for trading in Sao Paulo.

JBS’ management has repeatedly made the case that a U.S. listing would reduce its cost of capital and help its shares trade at multiples closer to peers such as Tyson Foods and Pilgrim’s Pride, which it controls.

Analysts at Bradesco BBI agreed that the much-awaited move will help close the valuation gap to its main peer in the U.S., referring to Tyson.

Sao Paulo broker Genial said JBS is a “buy” as a proposed listing in the U.S. will help improve its governance standards.

“A dual listing would better align JBS’ corporate structure it to global peers, which we believe could be received positively by investors,” Goldman Sachs said.

JBS in 2007 was the first Brazilian meat packer to go public. That year saw JBS embark on an acquisition spree in the U.S., followed by its purchase of the XL Foods beef packing business in Canada in 2013. In years prior, it had expanded capacity in Brazil and bought plants in Argentina, marking the start of its aggressive internationalization.

The U.S. listing has been in the works for the better part of a decade, but was postponed in part due to a 2017 corporate corruption scandal in Brazil and then again amid the COVID-19 pandemic.

JBS gets the lion’s share of its revenue from the U.S. market, where it processes beef, poultry and pork products for domestic consumption and export.

The JBS USA arm also oversees the company’s operations in Canada, which today include the former XL beef slaughter and packing plant at Brooks, Alta. and case-ready meat plants at Calgary and at Belleville, Ont.

— Reporting for Reuters by Ana Mano and Roberto Samora in Sao Paulo.

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As our reporter Don Norman wrote in last week’s front-page story, there’s been a torrent of bad news from some of the biggest names in the business.

In early May, Reuters reported that U.S.-based Tyson Foods, the world’s second-largest producer of beef, pork and chicken, had rocked financial waters, posting a loss in its second quarter. The report also noted the company’s rare triple-whammy of financial trouble; it was struggling across beef, pork and chicken businesses.

The only bigger name in meat, South America’s JBS, had its own bad news days later. The company posted a quarterly loss of US$290.2 million, Reuters reported May 11.

On this side of the Canada-U.S. border, Maple Leaf Foods posted a first quarter loss of $57.7 million in May. That follows a fourth-quarter loss of $41.5 million last year.

In April, Quebec’s Olymel announced the latest in a string of processing plants it intends to close. Around the same time, Manitoba’s own HyLife Foods announced it would sell its plant in Windom, Minnesota.

There are a few common themes among these stories. Feed prices make it more expensive to feed animals and animals themselves are pricier. Drought wrung out North American cattle numbers, leaving the U.S. with the smallest herd in more than half a century. Canada’s herd has, likewise, declined.

Other common threads include sliding demand and general inflation.

In other words, higher grocery bills are truly starting to bite into meat demand.

Food inflation has been leading the headlines for over half a year. If you look at Statistics Canada’s consumer price index records, average monthly inflation for store-bought food was almost seven times higher from May 2022 to April 2023 than in the same months in 2018-19, the year before the pandemic. Monthly inflation for meat is over seven times higher in the same comparison.

Right now, cattle prices are the highest in eight years, in no small part because of short supply, analysts said. But other than the cow-calf sector, which now has the growing season to offset feed prices, others in the value chain are hurting.

Canada’s feedlots are feeling the pinch despite animal prices. A recent Co-operator article quoted CanFax’s Brenna Grant, who noted that, in the current inflationary environment, Alberta feedlots would “need cattle prices to be 74 per cent higher than they are today” to make the same margins they did in 2015.

Recently reported processor troubles won’t help.

It obviously won’t be the first time that livestock producers have weathered market waves. Recent examples include plant closures during the pandemic that caused animal backlogs. I remember listening to beef and pork industry representatives in 2020, when the Canadian Pork Council estimated its members were losing $30 to $50 a head and the bottom had fallen out of weanling prices. In the beef sector, volatility led to set-aside programs.

Those same uncertain months propelled supply chain resiliency into the limelight. Maybe a resurgence in smaller processors to add diversity wouldn’t be a terrible thing.

It’s not so easy, of course. Among other things, economies of scale are very real and the financial times that stress bigger companies are often death blows for smaller businesses.

But perhaps it is time to consider whether there are emerging opportunities for local meat value chains.

Not everyone can direct-market their product. But local value chains have advantages. Their customers have already shown interest in local food. They might be more willing to absorb expense for the sake of product quality, keeping their money close to home or buying based on production practices they feel good about.

Also, since those brands are often based on a personal relationship, it might be harder to ‘fire’ their meat provider than to walk away from that steak in the grocery isle.

Policy decisions can help support a more robust local meat trade. Manitoba has made much of its protein strategy. Animal protein and animal protein processing are included in initial goal documents.

On a national scale, we need to reconsider regulations that keep meat trade locked within provincial borders unless it is processed at one of the few federally inspected facilities.

While the pandemic played havoc with value chains and contributed to inflation, it also emphasized that there is interest in locally produced food. The question is, how do producers take advantage of it?

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The effort to expand meat processing capacity comes after COVID-19 infections among workers in large meat processing facilities decimated meat production during much of 2020, contributing to higher food prices.

The projects, funded by the U. S. Department of Agriculture, vary from a $44,000 grant to a Virginia-based farm to support the processing of pasture-raised chickens, beef cattle and hogs for direct-to-consumer sales, as well as a $4.95 million loan to an Amarillo, Texas-based meatpacker to create a new processing facility for local producers and expand retail offerings (all figures US$).

U.S. Secretary of Agriculture Tom Vilsack said in a press conference that the programs aim to create “additional market opportunities that will hopefully create more income for farmers, more choice for consumers and more jobs in rural areas.”

Since 2021, the USDA has approved $54.6 million in grants to 278 meat producers through the Meat and Poultry Inspection Readiness Grant Program, as well as $73.14 million to 21 companies through the agency’s Meat and Poultry Processing Expansion Program, funded through the 2021 American Rescue Plan Act.

Additional money could become available for expanding meat processing later in 2023, said Vilsack.

Market concentration in meat processing has been a concern of Biden’s agriculture department. Four companies slaughtered around 85 per cent of U.S. grain-fattened cattle in 2018, according to the USDA’s most recent data.

New processors are selected, in part, in areas where farmers have limited options to sell their livestock, Vilsack said.

Facing severe drought conditions, cattle producers across the U.S. Great Plains sent record numbers of cattle to slaughter in 2022, including breeding stock, which could result in drastically lower supplies of market-ready cattle in the coming year and challenges to the USDA’s efforts to boost slaughter capacity.

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Live cattle prices on the Sao Paulo market are on a downward trajectory, with the “arroba” – a standard 15-kilo measure used as a benchmark – trading at an average of US$52.87, a significant discount compared to the first quarter, according to Scot Consultoria, an agribusiness consultancy. 

“The margins of slaughterhouses that export has improved,” said Alcides Torres, director of Scot Consultoria. He added that converting bigger margins into profits would vary from company to company. 

Brazil is home to some of the world’s biggest meatpackers, including JBS SA , Marfrig and Minerva SA. 

Beef prices in Brazil have been dropping with higher numbers of cattle coming to market as well as more aggressive negotiating stances adopted by foreign buyers, especially China.

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The agreement was announced in late May by the U.S. Occupational Safety and Health Administration (OSHA), which said the companies will work with teams of outside experts to develop and implement new policies on engineering, ventilation, visitor screening, cleaning, and personal protective equipment.

OSHA said the agreement involves plants in six states operated by JBS units Swift Beef Co., Swift Pork Co., JBS Souderton Inc. and JBS Green Bay Inc.

JBS USA, the subsidiary of Brazil’s JBS SA, said in a statement that the plans it is developing will build on a “COVID-19 playbook” the company has already adopted that lays out best practices and provides guidance to plant operators.

In 2020, a total of seven workers at two JBS facilities in Colorado and Wisconsin died from COVID-19 and nearly 650 employees tested positive for the virus.

OSHA said it had found that the facilities failed to take steps to protect workers and levied US$14,502 in fines.

A Reuters analysis of public data published in January found that nearly 90 per cent of U.S. processing plants owned by JBS and four other major meat companies had COVID-19 cases in 2020 and early 2021, and that 269 workers had died during that period.

John Rainwater, an OSHA official in Dallas, Texas, said in a statement that the agency will ensure the agreement with JBS is enforced to prevent mass outbreaks from happening again.

The announcement comes two weeks after a U.S. House of Representatives panel released a report saying JBS and other large meat processors had failed to adopt measures to stem the spread of COVID-19.

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The companies included Tyson Foods, JBS Foods, National Beef and Seaboard. Representative Raja Krishnamoorthi, the chairman of the panel, asked for information about price increases on beef, pork and chicken products, the panel said.

“While some companies may claim that the high prices feeding these outsized profits are explained by higher input costs, earnings data tell a different story,” Krishnamoorthi said.

“I am deeply concerned that meat-processing conglomerates may have engaged in predatory business practices, at the expense of consumers, during the pandemic,” he added.

Krishnamoorthi has asked for information and documents from each company by Feb. 8, explaining their decision to increase prices of their products despite rising profits. He also asked for an explanation on what the companies planned to do to lower prices in the coming year.

He said that net profit margins for the four biggest meat-packing companies have shot up over 300 per cent since the start of the coronavirus outbreak and accused the firms of increasing their profits “at the expense of the American families.”

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