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Pilgrim’s CEO: Expect $8 a bushel corn
Although some chicken producers have been cutting back on production, Pilgrim’s Pride Corp. Chief Executive Clinton Rivers said Thursday those cuts may not be enough to save industry profits hurt by high grain costs, according to the Associated Press.
At the BMO Capital Markets Agriculture and Protein Conference, Rivers said a 3 percent to 4 percent cut in production industry wide is needed to bring supply to a level that would boost retail prices — revenue that could then be used to offset far higher costs.
Chicken producers, like all meat companies, have struggled to handle higher costs for corn and soybeans, which are both used to make animal feed. Corn prices have jumped to record levels in the past year due to demand for the alternative fuel ethanol, which is also made with the grain. To take advantage of those higher prices, many farmers decided to plan corn instead of soybeans, leading to record prices for that crop as well.
Currently, corn is priced at above $6 a bushel. A year ago, the price was close to $3.75 per bushel. Rivers said the cost could rise even more, possible to $8 per bushel in the near future.
“We should realize the potential for $8 corn and we should be in a place to deal with it if it occurs,” he said.
To offset those costs, analysts and investors have been clamoring for a cut in production, which typically leads to higher retail prices since it lowers supply.
Some chicken producers, including Pilgrim’s Pride, have already committed to cutting production, leading to a cut of less than 2 percent across the industry. But other than Pilgrim’s Pride, large chicken producers have not announced any cuts.
Pilgrim’s announced a 5 percent cut in production beginning in June.
“It’s a concern when you take action and others do not,” Rivers said.
Tyson Foods Inc. Chief Executive Richard Bond said at the conference that boneless skinless breast meat prices, which are now at about $1.50 per pound, need to rise close to $2 per pound to offset $6 per bushel corn prices.
Tyson has not announced any production cuts but Bond said he expects other producers’ moves will bring supply in line.
“here should be less chicken by mid-June,” he said.
Pilgrim’s Pride shares rose 47 cents to $24.69 in afternoon trading while Tyson Foods shares climbed 50 cents to $18.66.
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