By Tom Polansek and Granth Vanaik

(Reuters) -Tyson Meals Inc shares plunged 16% to a three-year low on Monday because the U.S. meatpacker posted a shock second-quarter loss and minimize its full-year income forecast amid slowing client demand.

The weaker-than-expected outcomes point out cash-strapped consumers are slicing again on meat spending in a high-inflation surroundings whereas a shrinking cattle herd forces Tyson to pay extra for livestock, eroding margins. Tyson additionally continues to wrestle with elevated bills for staples like animal feed.

CEO Donnie King, who’s in search of to chop prices, stated Tyson is within the uncommon place of dealing with challenges in its beef, pork and rooster companies concurrently.

The corporate lowered its forecast for full-year gross sales to $53 billion to $54 billion from $55 billion to $57 billion, after adjusted working revenue for the primary half of fiscal yr 2023 sank 80% to $518 million.

“This quarter was undoubtedly a tricky one,” King stated on a convention name.

Tyson hiked meat costs final yr to offset inflation, however common gross sales costs for its beef and pork fell 5.4% and 10.3%, respectively, within the quarter ending April 1. Decreased demand for beef is making it troublesome for Tyson to go on larger prices to shoppers, the corporate stated.

Gross sales volumes in Tyson’s beef phase additionally fell, placing general gross sales down 8.3% at $4.62 billion.

Elevated feed prices and drought have pushed cattle producers to ship animals to slaughter as an alternative of maintaining them for breeding, forcing meatpackers to compete to purchase fewer livestock.

Tyson’s prices to purchase elevated $305 million and its beef unit’s working margins fell to 0.2% from 12.7% a yr earlier. The corporate pegged full-year beef margins at detrimental 1% to optimistic 1%, in contrast with its earlier forecast of two% to 4%.

Beef margins have been Tyson’s worst since 2015, whereas pork margins have been the worst in additional than twenty years at detrimental 2.2%, JPMorgan (NYSE:) analyst Ken Goldman stated.

In Tyson’s rooster enterprise, margins have been detrimental 3.7% as feed prices jumped by $145 million. The unit’s adjusted working revenue swung to a lack of $166 million from income of $203 million a yr earlier as Tyson recorded $92 million in expenses associated to the deliberate closure of two processing vegetation this month.

Greater rooster feed prices have been a “explicit disappointment,” Goldman stated, as grain costs have moderated.

Tyson posted an general adjusted lack of 4 cents per share, beneath analysts’ expectations for an 80-cent revenue. A yr earlier, earnings have been $2.29 per share.

“Most of the headwinds skilled are more likely to persist for the rest of the fiscal yr,” Chief Monetary Officer John R. Tyson stated.