Veterans of the US meat and poultry industry are well-used to fluctuations in the industry’s financial fortunes. But no one could have predicted the wild coaster-ride that the beef, pork and chicken sectors are now experiencing.

Just three years ago, fed beef processors were racking up record profits that were unheard of or believed to be unachievable. Leading the way was Tyson Foods’ beef segment. It had operating income in fiscal 2020 of a record $1.63 billion. The following year’s income was even more startling, $3.24 billion. Such wallet-expanding numbers were bound to cool off and did. But fiscal 2022 still produced income of $2.50 billion. This meant Tyson’s beef business had operating income of more than $1 billion for five years in a row, for a total of $9.49 billion.

Now beef’s profit bubble has well and truly burst. Tyson’s Beef segment’s income in the first quarter of fiscal 2023 (October to December last year) plummeted 82% from a year earlier to $166 million. Tyson then stunned the industry on May 8 by reporting its beef business in the January-to-March quarter made no money. This was against income of $638 million a year earlier.

As if this news wasn’t shocking enough, Tyson Foods the same day said it was significantly lowering its forecast for its fiscal 2023 beef margins in light of ongoing challenges to the segment’s profitability. Tyson only three months earlier, had forecast that beef operating margins would be 2% to 4% for the year. This was against a margin of 12.6% in 2022. But based on the deterioration in current market dynamics in its beef segment, Tyson now expects margins to be between a loss of 1% and a gain of 1% for the fiscal year, chief financial officer John R. Tyson told financial analysts during and earnings call on May 8.

Almost as bleak was Tyson’s chicken and pork performance in the quarter. Conditions have been challenging in its chicken business for some time and they showed no improvement in the quarter. Sales rose to $4.43 billion from $4.086 billion the year before. But it reported an operating loss of $258 million, versus income of $198 million the year before.

Commodity prices for most fresh chicken cuts are much lower than last year, with boneless breast meat, tenders and wings down more than 50%, president and chief executive officer Donnie King told financial analysts. Tyson now expects full year chicken operating margins to be between a loss of 1% and a gain of 1%. While Tyson’s pork business gained a modest 1.1% in volume in the quarter, that was offset by a 10.3% decline in average sales price due to soft global demand. This meant sales fell 9.2% during the quarter to $1.421 billion from $1.565 billion the year before. Operating loss was $33 million versus income of $59 million the year before.

Beef’s lack of income and losses in its pork and chicken segments meant Tyson reported its first quarterly loss since the fall of 2009. Operating loss was $49 million versus income of $1.156 billion. Net loss per share was 28¢ versus income of $2.28. Tyson knew the second quarter was going to be challenging and it was, King told analysts. He admitted he has never seen this highly unusual situation for beef, pork and chicken. All three segments are experiencing challenges at the same time, which is not the norm, he said. This was a sentiment echoed by JBS’ CEO as well.

These challenges came after the meat supply increased as packers ramped up production and increased wages for employees to meet demand, noted the Wall Street Journal in an editorial at the time. But producer costs for cattle and chicken have remained elevated. At the same time, consumer demand for pricier cuts of beef and pork has declined as inflation ate into purchasing power. All of this shrunk Tyson’s margins.

Such factors also impacted the profits of JBS SA, the world‘s largest protein company, both in the United States and globally in the first quarter. JBS Beef North America reported adjusted EBITDA of a negative $23.2 million, versus EBITDA of $791.8 million a year earlier. Beef margins in North America suffered a material impact compared to the previous year, because of changes in market conditions due to the turn of the cattle cycle, reducing the availability of animals for processing, said JBS.

In this scenario, live cattle prices remained at high levels, increasing 16% year-on-year in the quarter to $160 per/cwt, while wholesale beef prices grew only 2%, said JBS. Weaker demand from Asian countries impacted US beef exports, whose volumes dropped 8.6% year-on-year, JBS USA Pork fared better in the quarter. It had adjusted EBITDA of $66.4 million, versus $186.8 million a year earlier. But wholesale pork prices fell by approximately 20% year-on-year and grain and labor costs remained at high levels, also pressuring results, said JBS.

JBS’s Pilgrim’s Pride Corp. (PPC) certainly fared better in the quarter than did Tyson’s chicken business. PPC had adjusted EBITDA of $152 million, versus $501.8 million a year earlier.

In the last 12 years, during which JBS already had a global platform, this was the first quarter that it had faced adversities in almost all countries where it operates, said Gilberto Tomazoni, JBS’s global CEO. This makes JBS believe more than ever that its team members and its geographical and protein diversification are its greatest strengths, especially during challenging times, he said.

Understanding the reasons for Tyson’s and JBS’ US beef performances in the first quarter is invaluable to forecasting results for the second half of 2023. Right now, prospects for profits look bleak. Beef demand is being hurt by high retail prices, as inflation continues to erode consumers’ purchasing power. Fed cattle supplies are set to tighten the rest of the year, with supplies of cattle on feed 150 days or more due to be below year ago levels on June 1. Hog supplies remain tight as well.

Tyson’s chicken challenges appear to be greater than those of PPC, so the second half will be a stern test of how quickly Tyson can become competitive and profitable again in the protein that built the company. It is salutary however that its chicken business can go from being its most consistent money-maker to being its weakest performer in just a few years.