In a public statement yesterday, Pilgrim’s Pride, the largest U.S. and Puerto Rico chicken producer, and the second largest producer in Mexico, said it will reduce weekly processing by 5 percent compared to last year’s levels. The cutback, which will take full effect in June, includes the company’s previously announced plan to shut down its chicken processing plant in Siler City, N.C. Another ramification of the cutback could mean that the processing site in El Dorado, Ark. may be closed, but a final decision hasn’t been made, Pilgrim’s Pride said.
Inflated costs for feed grains are impacting all chicken suppliers; these grains make up half of the cost of raising a chicken. Producers have been rapidly increasing chicken prices, resulting in higher costs for consumers at the grocery store and thus fewer chicken sales. Clint Rivers, President and CEO of Pilgrim’s Pride commented on the situation saying, “Soaring feed-ingredient costs fueled by the Federal Government’s misguided ethanol policy has created a crisis for our industry, the true effects of which are only just now beginning to be felt by American consumers in the form of higher food prices.”
For its fiscal year ending September, Pilgrim’s Pride estimates its total costs for corn and soybean meal will be $1.3 billion higher than 2006. These astronomical increases are crippling its business. For the quarter ended December 29, the company lost $32.3 million, which was mainly attributed to increasing production costs. In an attempt to offset surging prices, the company has sold its turkey business segment and is considering selling several distribution centers as well.
The decision to cut production comes a week after fellow producer Cagle’s Inc. announced that it planned a 4 percent decrease in chicken production. As production and grain costs continue to rise, industry experts are looking at two other large rivals: Tyson Foods and Sanderson Farms. These companies are more diverse and operate in more than just the chicken industry, but have yet to announce any changes to production. It is unclear if they will follow the trend or try to capitalize on reduced production and higher retail chicken costs.
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