May 6, 2008

Pilgrim's Pride widens Q2 loss on high feed costs

Pilgrim's Pride has widened its second-quarter loss amid soaring grain prices.

Pilgrim's Pride has raised its 2008 forecast for feed ingredient costs by US$100 million, expecting it to be more than US$800 million higher than in fiscal 2007.

Clint Rivers, chief executive of Pilgrim's Pride, said high grain costs would continue to pressurise the company's operating results during the second half of fiscal 2008.

For the quarter ended March 29, Pilgrim's Pride reported a net loss of US$111.4 million, up US$71.3 million on-year.

Revenue increased 5.7 percent to US$2.1 billion but the surge in grain costs in the quarter had led to cost of sales exceeding revenue. Feed ingredient costs jumped US$200 million in the recent quarter, as the average price of corn per bushel increased 29 percent while soymeal skyrocketed by more than 63 percent.

Aside from feed grains, higher fuel and energy prices have cut deeply into the company's earnings.

The company has been working to pass the price increases to their customers but they have not been able to keep pace with the volatile grain market, said Rivers who also blames the US government's ethanol policy for the company's predicament, saying that the policy has driven up grain prices.

Pilgrim's Pride had announced plans to cut weekly chicken production by 5 percent and to shut down six distribution centres and a processing plant in an effort to handle rising feed costs.

Rivers said Pilgrim's Pride is continuing to evaluate their production facilities for potential mix changes, closure, sale or consolidation in an effort to return profitability to the company.