Pilgrim's Pride highlighted "robust prospects" for US
chicken producers as the poultry group unveiled an 80% jump in earnings, lifted
by a $143m windfall from lower grain prices.
The group, controlled by Brazilian meat giant JBS, said that
US chicken industry margins were being underpinned by a limited rise in
production expectations, at a time when demand is being supported by strong
prices of rival proteins, and by expectation of record exports this year.
Although the number of eggs set in incubators is running
1.5% higher than a year ago, on a six-week average basis, actual chick
placements are, at roughly 165m a week, in line with those a year ago, and
below the five-year average.
The difference reflects "low levels" of hatchability, a
factor some have attributed to producers build flocks by hanging on to older,
and less productive, laying hens.
"All gains in total hatching layers are being offset by a
corresponding decline in egg production," Pilgrim's Pride said.
The dynamic has been reflected in a minimal increase in
broiler meat production, a factor which prompted US Department of Agriculture
officials last month to cut by 200m pounds, to 38.1bn pounds, its forecast for
domestic output this year.
A pattern of "little-to-no growth in the number of birds
being slaughtered is expected to continue on into the second quarter and possibly
longer", the USDA said, noting that this output stagnation had been reflected
in a "radically changed" situation regarding chicken stocks.
Chicken in cold storage in the US as of April 1 was, at 588m
pounds, down 6.4% year on year and 13% month on month, "of the largest one-month
declines" on record, and "the second lowest monthly cold storage level since
2003", Pilgrim's Pride said.
Other factors believed to have contributed to the slowdown
include the cold US winter, which stems animal weight gains, with Paragon
Economics and Steiner Consulting noting, unconfirmed, speculation of "disease
Whatever, the dynamics have been reflected in a sharp
pick-up in chicken meat prices since February.
"Breast meat and tender prices continue to rally and have
pushed the cutout [wholesale price] back to the 2013 levels after beginning the
year 25% below last year," Pilgrim's Pride said.
"The current environment for the chicken industry indicates
robust prospects for 2014."
And the group added that it was "well positioned to reap the
benefits", after annual cost cuts it said had reached $642m since 2010, in the
early days after JBS bought the company from bankruptcy, with a further $220m in savings expected this year.
The comments came as the group reported a earnings of $98.1m
for the January-to-March quarter, up from $54.2m a year before, on revenues
down 0.9% at $2.02bn.
The rise in earnings reflected largely a drop in grain
prices, which cut the company's feed bill by $143.3m.
The earnings equated to $0.38 per share, marginally below
the $0.39-per-share result Wall Street had expected.