July 30, 2012

Pilgrim's Pride close to agreement on Brazil's corn imports

Pilgrim's Pride is close to completing a deal to import corn from Brazil, in an effort to reduce the impact of the recent rise in costs for feed due to the worsening US drought.

"We are working on importing Brazilian corn ... as soon as next month," said Fabio Sandri, chief financial officer at Pilgrim's Pride, during a conference call to discuss the company's second-quarter earnings.

Headquartered in Greeley, Colo., Pilgrim's Pride is the world's second-largest chicken producer.

The move by Pilgrim's to import Brazilian corn feed is the latest example of how this year's hot, dry conditions across the Farm Belt, the most dire on record since 1956, are sending higher costs rippling through the supply chains for meat like chicken, beef and pork.

Prices for corn have risen so quickly in the last six weeks that it's now more affordable for companies to ship in grain from another continent. Smithfield Foods Inc. (SFD), the world's largest pork producer, said earlier this week it will ship in Brazilian corn for use in its hog-raising operations.

Pilgrim's uses 4.5 million bushels of corn each week, the company said, and until recently it seemed a bumper autumn crop would lead to very affordable prices.

"We thought ... we were going to have cheaper prices in the new crop," said chief executive William Lovette. "That turned out not to be the case with the drought."