Meat Industry Giants Soar: Poultry Profits Surge

Poultry and Beef: A Tale of Diverging Fortunes in the Meat Industry

The meat industry is currently experiencing contrasting trends between poultry and beef sectors. Tyson Foods and JBS SA are expected to report significant increases in earnings, driven by a resurgence in poultry profits. This positive trend comes as both companies face challenges in their US beef operations. The decrease in grain prices has made chicken production more cost-effective, leading to increased consumer demand for chicken over beef. Consequently, inventories of chicken parts have decreased, marking a departure from previous years of high feed costs and surplus stock.

Pilgrim’s Pride, a subsidiary of JBS, is forecasted to achieve over a threefold increase in its Q2 profits, reaching a two-year high. Similarly, Tyson Foods is projected to see a fourfold rise in its fiscal Q3 profit, primarily due to its chicken business. Pilgrim’s Pride's results will be released soon, followed by Tyson's on August 5.

In contrast, the beef industry faces significant challenges. Rising cattle costs have created difficulties for companies like Tyson and JBS’s North America beef division, which is expected to experience a 78% decline in earnings. However, JBS continues to benefit from profitable beef operations in Brazil and Australia.

The poultry sector's growth, supported by lower grain prices, has allowed producers to meet the increasing demand for affordable protein. BRF SA, a major Brazilian chicken producer, is expected to report record earnings, while Seara, another JBS subsidiary, is also projected to see a substantial profit increase.

Overall, while the poultry industry is thriving, the beef sector is encountering difficulties. However, the overall outlook for major meat industry players remains positive, especially with the strategic shifts and market conditions at play.

Key Points

• Tyson Foods and JBS SA are seeing earnings growth due to lower grain prices and increased chicken demand.
• Pilgrim’s Pride is anticipated to report a tripled Q2 profit, with Tyson projecting a fourfold rise in Q3 profit.
• JBS’s North America beef division is expected to face a 78% decline in earnings due to higher cattle costs.
• Beef operations in Brazil and Australia are performing well, contrasting with the challenges in the US market.
• BRF SA and Seara are expected to announce record earnings in the poultry sector.

Industry Overview

The rise in poultry profits for Tyson Foods and JBS SA, driven by reduced grain prices and growing demand, contrasts with the challenges faced by their US beef operations. This trend is favorable for companies like Pilgrim’s Pride and BRF SA, which are set to report strong profits. Meanwhile, the rising cost of cattle is challenging JBS’s North American beef division. These market dynamics could potentially influence global meat industry strategies, favoring poultry production in more cost-effective regions like Brazil and Australia.

Company Profiles

JBS SA: A leading global meat producer, JBS SA has a diverse portfolio across beef, poultry, and pork. Its operations span the United States, Australia, and Brazil, allowing it to manage market fluctuations, as demonstrated by its mixed performance in North American and Brazilian/Australian beef sectors.

Pilgrim’s Pride: One of the largest chicken producers in the United States, Pilgrim’s Pride, owned by JBS SA, has capitalized on favorable market conditions, including lower grain prices and increased chicken demand, to project a significant profit increase.

BRF SA: Known as Brasil Foods, BRF SA is a major player in the global poultry market. The company is expected to report record earnings, reflecting the broader industry trend of higher profitability supported by lower feed costs and rising demand for affordable protein sources.