By Patrick Thomas

The Trump administration is prepping a financial lifeline for smaller meatpackers struggling with dwindling cattle supplies, which have sent beef prices surging.

The U.S. Agriculture Department plans to pledge up to $500 million in payments for small- and medium-size meatpacking companies. The money would be distributed to beef plants that keep their processing volumes at a certain level.

"USDA is taking targeted action to preserve the independent processing capacity that ranchers rely on," said Agriculture Secretary Brooke Rollins. The Wall Street Journal earlier reported details of the plan.

The administration wants to provide a financial safety net for smaller slaughterhouses at a time when meat processors are losing an estimated $300 per head of cattle.

The funding excludes the four largest beef processors in the U.S.: Tyson Foods, JBS, Cargill and National Beef, which is owned by Brazil-based MBRF Global Foods. Those companies together process roughly 85% of U.S. beef.

The planned aid is the administration's latest attempt to curb record-high beef prices. Trump has directed top advisers to find solutions, and the Justice Department launched a criminal probe into the largest U.S. meatpackers.

Beef-industry officials have said high prices are the new normal, with the U.S. cattle herd at its lowest level since 1951 and consumer demand for beef staying strong. Ranchers, who are enjoying their strongest profits in decades, have been reluctant to increase the size of their herds.

Beef-processing executives have said their companies are losing billions of dollars and are hurting just like consumers. Tyson Foods closed one of its larger beef plants in Nebraska earlier this year. JBS, the largest U.S. beef processor, said earlier this month that it was closing a Pennsylvania facility as cattle costs surge.

Industry analysts have anticipated that smaller meatpackers could also close their doors as it becomes more costly to buy cattle. Many of those processors don't produce chicken or pork, which have generated profit for more diversified meat companies.

The new USDA program would be open to U.S.-owned processors with market shares that are smaller than the industry's big four. The smaller operators would be eligible for funding if they process this year certain percentages of their 2025 totals, such as 100%, 90% or 70%.

Companies would be reimbursed per extra head of livestock they process beyond USDA-set thresholds. The exact amount each plant will be compensated is to be determined and varies depending on the facility.

Write to Patrick Thomas at patrick.thomas@wsj.com