JBS (JBS), Smithfield (SFD): Protein Substitution Stops Working

Between August 3 and August 11, 2026, JBS N.V. (JBS), Tyson Foods (TSN) and Smithfield Foods (SFD) each told investors on their quarterly earnings calls that protein substitution has stopped working: the price gaps between beef, pork and chicken reached record levels, volume did not move between the three categories, and discounting no longer bought sales either [1][2][3].

What a multi-protein portfolio was supposed to hedge

Large US meat processors run beef, pork and chicken lines at the same time and earn the processing spread between what live animals cost and what the meat sells for. The industry benchmark is the daily cutout, which adds up the wholesale quotes for every cut of a carcass and expresses the total as a price per hundredweight; investors use it to estimate what a processor will earn in a quarter. Running all three proteins has long been treated as a hedge: when one meat gets too expensive, demand shifts to a cheaper one and the portfolio catches that volume on another line.

What failed this quarter is the shift itself. On the August 11 call, the CEO of JBS USA said the company had assumed proteins substituted for each other fairly readily on price, and that the quarter's biggest surprise was the inelasticity of protein demand, with beef, pork and chicken demand not substituting much at all [1]. On the same call, the global CEO running the Brazilian business was asked whether consumers were downgrading and said he does not see people moving from one product to another, because protein now sits at the top of every population group's priorities [1]. Nine months earlier, on the November 15, 2025 third-quarter call, the same company still discussed cross-protein substitution as the mechanism at work [6]. That assumption is not confined to processor models — retailers use it to set shelf space and features, and restaurants use it to design menus — so more than one company would have to re-plan if it no longer holds.

Supply up 4.5%, spreads at record levels, and all three proteins growing

The chicken-side numbers come from Pilgrim's Pride, the chicken company JBS controls, which reported first on July 30. USDA ready-to-cook production rose 4.5% year over year on higher head counts and modestly higher live weights; in the same quarter the retail fresh meat department posted dollar sales growth across all major proteins, with chicken growing fastest; boneless skinless breast volumes rose year over year while pricing held steady, and the spread versus ground beef stayed at record levels [4]. Under the old assumption, a record spread plus the extra supply should have pulled volume away from beef and beef dollar sales should have fallen.

On the pork side, JBS made the point from a different angle: industry processing volume was roughly stable while the cutout moved lower, so the same supply cleared at a lower price, which points to weaker demand [1]. Smithfield said on August 11 that the biggest change versus a year ago is that the industry has become markedly less promotional, with fewer features, fewer displays and shallower discounts, and that consumers are no longer responding to discounts alone [3].

Together these facts support one reading: price levels did not determine where volume went this quarter, neither across categories through the spread nor within a category through discounts. They are not enough to show that consumers have stopped noticing price. Pilgrim's Pride itself attributed its chicken volume to affordability, and the word it used was substitution [4].

Each protein line's margin now turns on its own supply

If spreads no longer move volume, the hedging value of a multi-protein portfolio falls. Each line's margin returns to being set by its own placement cycle and supply balance, and the inference that high prices in one meat will lift volume in another has to be re-established.

The promotional side is changing too. Once discounts stop bringing volume back, the money moves away from price cuts, and Smithfield has already reduced its promotional intensity [3]. Tyson took another route in the same direction: in the quarter when industry chicken cutout values fell, it grew its own net price realization through mix, customer volume commitments and value-added pricing structures [2].

The boundary matters. JBS said on the same call that pork demand looks weak [1], and Smithfield cut its full-year outlook that same day, citing continued macroeconomic pressure as sales fell [5]. So "spreads no longer move volume" currently looks closer to demand for all three proteins moving in the same direction than to consumers ignoring price. What can be checked later is whether the chicken-to-ground-beef spread stays at record levels while chicken volume growth stops leading, and which way promotional intensity and net price realization go at each company.

Which companies this affects:

• BRF S.A. (BRFS): a Brazilian chicken and pork processor competing with JBS in the same domestic market, whose production planning and pricing rest on the same assumption that consumers switch between proteins on price.
• Cal-Maine Foods (CALM): the largest US egg company; eggs are the cheapest tier of household protein spending and have long been treated as the place shoppers trade down to when meat gets expensive, so whether that shift still happens bears on where its demand comes from.
• Texas Roadhouse (TXRH): a steak-led restaurant chain for which beef is the single largest cost item; whether guests order a different protein when beef is expensive determines how it absorbs that cost.

Sources

[1] Drillr · JBS N.V. (JBS) · 2026-08-11 · Q2 FY2026 earnings call

"We have found out actually that, and we didn't think it, we used to think that proteins had more of a substitution effect depending on prices. And that was a big surprise of the inelasticity of protein demand when it comes to demand for beef, demand for pork, demand for chicken not being so substituted to each other."

[2] Drillr · Tyson Foods (TSN) · 2026-08-03 · Q3 FY2026 earnings call

[3] Drillr · Smithfield Foods (SFD) · 2026-08-11 · Q2 FY2026 earnings call

[4] Drillr · Pilgrim's Pride (PPC) · 2026-07-30 · Q2 FY2026 earnings call

[5] Morningstar/Dow Jones · Smithfield Foods · 2026-08-11 · news report · https://www.morningstar.com/news/dow-jones/202608115179/dow-jones-top-company-headlines-at-9-am-et-cardinal-health-logs-mixed-sales-sees-growth-in-new-year-sony

[6] Drillr · JBS N.V. (JBS) · 2025-11-15 · Q3 FY2025 earnings call summary

This is only meant to surface industry changes and companies you may have overlooked - it is not a stock recommendation.