August 2, 2013

 

Pilgrim's Pride abates 'strong' US poultry dynamics

 

 

Even as producers raise output to exploit high prices, Pilgrim's Pride flagged the "strong fundamentals" of the US poultry industry, as it unveiled its record quarterly profits.

 

The USDA has forecast US broiler meat production rising 3% in the second half of 2013, to 19.1 million pounds, implying a sharp acceleration from the 1.6% recorded in the January-to-May period.

 

Paragon Economics and Steiner Consulting said in a report, "It appears that the broiler industry has now clearly made the shift from 'potential' expansion to actual output growth."

 

With the number of eggs set on incubators rising at a rate of nearly 3% in June and early July, "higher chicken production is on the way". Indeed, output may show a "counter-seasonal increase", this month, the report said, attributing the increased production to chicken groups' wish to exploit historically high, if falling, meat prices.

 

However, Pilgrim's Pride signalled cause of caution on expectations rising production, with the number of US hatching later hens, while expected to rise some 800,000 to 51.7 million this year, still set to be the lowest, bar the 2012 figure, since 1996.

 

"The average annual hatching layer supply is expected to be 6.3% lower than the 10-year industry average. The increase is coming in part through producers extending the average age of hens, "which is affecting egg production and hatchability," the group said.

 

And while the number of eggs set in incubators is well above year ago levels, it remains below the five-year average pace, and is being followed by a smaller rate of placement of chicks for growing.

 

Furthermore, there is the potential for extra exports to swallow up increased amounts of US production, Pilgrim's Pride said, assessing that the figure of exports rising to a record 7.6 million pounds next year "could easily" be exceeded.

 

The comments came as the group unveiled a 175% jump to US$190.7 million in earnings for the April-to-June quarter, by far its best quarter on record, reflecting wider margins. Sales rose 10.6% to US$2.18 billion.

 

"Our focus on our key customers and ability to adapt to changing market conditions has helped us gain significant business in strategic channels," Bill Lovette, the Pilgrim's Pride s chief executive, said.

 

Earnings per share of US$0.74 came in ahead of Wall Street expectations of a US$0.57-a-share number.