Beef – Margins were tight to negative in Feb… but they are fine right now in early march. Per TSN (in B of A webcast) that spread should improve as we get into the grilling season and back half of FYE 2013. TSN’s beef margin was about 1% in Q1, Q2 will break even at best, but Q3 and Q4 should make a couple %
Pork – same as beef except normalized margins are higher to begin with. Q1 had a great margin … this Q not so good … next two back to good margins
Prepared foods – TSN’s margins here should be pretty standard and consistent going forward. They are ramping up for additional lunch meat processing that has added some expense, but should pay off well in a Q or two.
Chicken – should be the star of 2013 and 2014. This is not a spread biz like beef and pork, so increases in market prices are good. Currently GA dock price for whole chicken is at an all-time high, going into grilling season. This when lbs. produced have been increasing. Chicken is taking protein market share from beef as consumers look for less expensive alternatives. Unlike beef and pork, this segment is also affected by corn prices. Many experts on Ag Web sites that market directly to the farmers are calling for new crop corn in the $4 to $5 range. Think about it $1 GA dock and $4 corn …. Probably not going to be that amazing … but could be a special year for chicken.
TSN is a very seasonal stock with its two best months in front of it(April & May), but then it is usually downhill from there, and if past years is any guide, it will trade down to at least the mid teens sometime during June-Oct. A lot can go wrong here recalls, recession, drought, bird flu scare, pink slime, etc., besides supply gluts and corn prices.