'Unprecedented' feed costs lead to loss for Pilgrim's Pride
January 29, 2008
by Keith Nunes
PITTSBURG, TEXAS – A spike in feed costs combined with the full integration of the Gold Kist, Inc. acquisition widened the loss for Pilgrim’s Pride Corp. during the first quarter of fiscal 2008 compared to the same period during fiscal 2007. For the first quarter, ended Dec. 29, the company reported a loss of $32,329,000, compared to a loss of $8,736,000 for the first quarter of fiscal 2007. Sales for 2008 were $2,093,211,000 compared to $1,337,132,000 for 2007.
"Our results in the first quarter of fiscal 2008 reflect the significant challenge posed by higher feed-ingredient costs, which have climbed sharply over the past few months and currently show no signs of abating in 2008," said Ken Pilgrim, chairman and interim president of Pilgrim’s Pride. "Our feed-ingredient costs for the quarter, on a pro forma basis, rose 24%, or $157 million, when compared to the same period a year ago. Those cost increases – when coupled with labor shortages, higher production, freight and fuel costs during the quarter – offset most of the improvements in market pricing and product mix."
Looking ahead, Mr. Pilgrim said, based on the current commodity futures markets, the company's total feed-ingredient costs for fiscal 2008 would be up more than $700 million from last fiscal year. He added that he believes surging feed costs make it unlikely that the U.S. chicken industry in 2008 will grow at the 3% rate projected by the U.S. Department of Agriculture last fall.
"Given the unprecedented run-up in feed-ingredient costs, we believe the industry will have to take a much closer look at production levels for 2008 and that overall production is not likely to grow at the rate previously projected by the U.S.D.A.," he said. "We will continue to closely monitor industry fundamentals and take whatever actions we feel are necessary to better balance our supply and demand and to position our company for sustained, profitable growth."