US meat companies' weak link may be chicken

Tyson Foods and Pilgrim's Pride will report their quarterly results soon and analysts expect the chicken segment to be both companies' weak link.

Pilgrim's Pride will report its first quarterly results since exiting Chapter 11 bankruptcy in December. As part of its bankruptcy restructuring, Pilgrim's Pride sold a majority stake to Brazilian meat company JBS SA.

A year ago, Pilgrim's Pride reported a quarterly loss of US$228.78 million, including US$3.7 million in restructuring charges. Because of the company's dependency on chicken, the forecast for a profit was less clear.

Tyson is expected to report a profit compared with a year-ago loss. The company produces beef, pork, and chicken, and analysts said beef and pork should be the profit drivers.

"Chicken profitability in late 2009 was a struggle. I think it is touch and go if the industry will post a profit on chicken," said economist Jim Robb.

Corn prices were above US$4 per bushel for much of the period while breast meat prices dropped to near US$1 per pound. Chicken prices hit their low in October, said economists.

In late 2009, beef and pork processors were mostly profitable, helped by exports and by better hide and offal prices, said Robb.

On average, beef processors earned an estimated US$2.27 per head per week in the quarter, while pork processors earned US$5.48 per head per week. Robb said beef packer profit margins were estimated to increase 20-25% in the final quarter of 2009 against 2008, while pork profit margins were up an estimated 30-35% from 2008.