May 2, 2011

Higher feed cost pressure weighs on Pilgrim's Pride

Pilgrim's Pride Corp reported that it was likely to jack up prices after higher feed costs resulted in a larger-than-expected quarterly loss.

Winter storms in the Southeast also cut into production as plants were closed in part of January, the company said.

The storms hurt earnings more than expected, said BB&T Capital Markets analyst Heather Jones.

Pilgrim's Pride, which is majority owned by Brazilian meat producer JBS SA , said its loss had widened to US$120.8 million, or 56 cents per share, in the first quarter ended March 27 from US$45.5 million, or 21 cents a share, a year earlier.

Revenue rose to US$1.9 billion from US$1.6 billion.

Margins at Pilgrim's Pride suffered from the selling off of chicken inventories to raise cash and reduce working capital.

Feed costs were up US$188 million for the quarter from a year earlier and should be up US$500 million for the year, the company said. Strong demand by ethanol processors and grain exporters have pushed up the price of feed corn.

The company said it had purchased its corn needs for the balance of the year and 50% of soymeal.

"We will continue to look at further price increases and will execute structural changes in our book of business with regard to fixed versus market-based pricing," Chief Executive Officer Bill Lovette said.