Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Hormel warns of 'substantial' turkey setback from bird flu

Twitter Linkedin eCard

Hormel Foods warned of a hefty hit from bird flu to turkey supplies to its Jennie-O Turkey Store arm even as the meat group unveiled better-than-expected profits, helped by a boost to its foods arm from lower pork costs.

The Minnesota-based group, whose brands include Spam luncheon meat, unveiled a 29% rise to $180.2m in earnings for the three months of April 26, on sales up 1.5% at $2.24bn.

On a per share basis, earnings came in at $0.67, ahead of market expectations of a $0.62-per-share result

The increase was helped by a 34% surge to $216.0m in operating profits at the group's refrigerated foods division, which enjoyed "lower input costs", as improved supplies of hogs for slaughter, amid the retreat of porcine epidemic diahorrea virus (PEDv), which cut values of both pork and the animals themselves.

US hog values in March, average $50.30 per hundredweight, down 39% year on year, according to US Department of Agriculture figures.

The pork cutout, the wholesale value of the processed pork carcass, fell in late March to a six-year low of $64.56 per hundredweight, although it has since staged a sharp recovery, to $84.39 earlier this this week.

'Significantly challenged'

The Jennie-O Turkey Store arm also enjoyed a strong rise in operating profits of 49% to $167.6m, helped by margin improvements both from lower grain and fuel costs and growth in more expensive products.

However, the knock-on effect of the US bird flu epidemic, which has prompted the culling of more than 33m birds in infected poultry flocks, "began to impact operations towards the end" of the quarter, Hormel said.

The division "exited the quarter with substantial supply chain challenges brought on by avian influenza".

And "we expect Jennie-O Turkey Store to be significantly challenged going forward due to the impacts of avian influenza on our turkey supply chain", said Jeffrey Ettinger, the Hormel chairman and chief executive.

The group forecast that its earnings for the year to late October would come in "at the lower end" of the $2.50-2.60 per share that it has guided to.

'Almost 6m turkeys affected'

The caution follows an announcement by Hormel two weeks ago that it was laying off 233 workers at a Minnesota plant because the bird flu outbreak has reduced the number of turkeys available for processing.

The group last year sourced some 78% of its turkeys from producers in Minnesota - where about 5.5m turkeys and egg-laying chickens have either died from bird flu or are being culled - and in Wisconsin, which last month declared a state of emergency over the outbreak.

The USDA last week cut by 25m pounds its forecasts for US turkey production in both the April-to-June and July-to-September quarters, saying the downgrades were "due largely to concerns that birds lost from [bird flu] outbreaks in turkey flocks in Minnesota and other states would limit production growth".

The downgrades were "based on estimates of almost 6m turkeys affected by [bird flu] outbreaks as of early May," the USDA said, adding that the cuts might have been worse were it not for signs of expansion in terms of turkey eggs set in incubators, and the number of poults placed for feeding.

The USDA's estimate for total US turkey meat output in 2015, at 5.979bn pounds, is still up 3.9% year on year.

Hormel shares closed up 4.2% at $58.14 in New York.


Twitter Linkedin eCard
Related Stories

Evening markets: Soybean futures gain, cotton prices jump on US data

Initial USDA forecasts for crop supply and demand for 2018-19 lift soy and cotton prices, but are not so well received in the cotton market

Will protein prices fight back against fat in dairy markets?

Prices of fats remain elevated against protein values in dairy - at a time when the opposite is true in markets for oilseed products

Cattle numbers on US feedlots up 7% in year to February

At least, so a survey shows ahead of monthly US Department of Agriculture data due later

US cold storage data 'neutral for battle, slightly bearish for hogs'

US pork stocks grew sharply last month, official data show. But beef inventories showed a smaller rise, and chicken stocks shrank a touch
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069