This has been a tough year for meat-packer margins, especially in the pork sector, according to the LivestockMarketingInformationCenter.

LMIC notes that overall, beef packer margins have struggled this year but have improved recently, whereas pork packer margins have suffered dramatically this year, averaging less than half of those posted in 2008. Packer margins may continue to struggle for the balance of 2009, especially for pork packers.

At the onset of 2009, beef packer margins were rather strong until declines in wholesale beef values and byproduct values – mainly hides – began to pressure margins in February and March. In fact, the live to cutout price spread crumbled in the first quarter falling from about $170 per head in January to under $90 per head in March. The last time the spread was that narrow was back in the second half of 2007. Typically, the live to cutout spread widens during the spring months reflecting the beginning of outdoor grilling season and seasonally larger cattle prices. That general seasonal pattern did occur this year.  By May, the spread had widened to $148 per head, only six percent below last year but over $44 per head less than the 2003-2007 average.

Pork packer margins have been dismal this year, according to LMIC. The live to cutout spread began to narrow last October when the deterioration in overall economic conditions accelerated and has continued in 2009. In January, pork packer margins fell below $10 per head and by February the spread narrowed even further to $5 per head, a value not seen since the mid-1990’s. Packer margins did improve some in the spring months due to slightly better wholesale and byproduct values, but any additional strength was derailed by the impacts of the H1N1 situation on the pork market as packer margins dropped below $7 per head in May. For the first five months of 2009, the live to cutout pork price spread averaged about $6.90 per head compared to $15 per head last year and was 51 percent below the 2003-2007 average. Pork packer margins are forecast to remain well below historical levels for the balance of 2009.