By Karl Plume
CHICAGO (Reuters) - Sanderson Farms Inc (SAFM.O: Quote, Profile, Research, Stock Buzz), the No. 4 U.S. chicken company, said on Tuesday that exceptionally high feed costs will push meat prices higher and likely increase consumer demand for cheaper-priced poultry.
"We believe going forward that chicken and poultry will be in an advantageous position versus other proteins," Joe Sanderson, the company's chief executive, said at the Reuters Food Summit in Chicago.
"You haven't seen $5 (per bushel) corn in (the price of) pork yet. I think that's coming maybe in the fall or the first quarter of next year," Sanderson said of the primary feed grain that has more than doubled in price over the past two years.
"I don't know how long this $5 corn is going to take to show up in the price of beef, but it will," he said.
An increase in meat prices may not trigger an immediate consumer response, but a prolonged period of higher prices could change eating habits to benefit poultry, Sanderson said.
High feed prices, especially for corn, have chewed into the profits of livestock and poultry producers and have prompted price increases at restaurants and grocery stores.
U.S. meat producer Tyson Foods Inc (TSN.N: Quote, Profile, Research, Stock Buzz) said in January it stopped slaughtering cattle at one of its plants and analysts said more such moves by other companies were possible following months of losses in the U.S. beef industry.
In February, Smithfield Foods Inc (SFD.N: Quote, Profile, Research, Stock Buzz), the largest U.S. hog producer, said it was paring its sow herd by 4-to-5 percent due to high feed prices. The cutback in sows will lead to a similar reduction in its slaughter hog supply.
Last week, top U.S. chicken producer Pilgrim's Pride Corp PPC.N said it was closing a processing facility and some distribution centers amid high feed costs and an oversupply of chicken.
Analysts said other meat companies may follow moves as corn costs hover in the mid-$5-per-bushel range Cc1due to strong demand from ethanol producers and record corn exports.
But Sanderson Farms, which has expanded every year for the last 12, expects to grow by another 16-to-17 percent in 2008. Its newly built Waco, Texas, poultry plant is currently running at about 50 percent capacity, but it was expected to be running at full capacity by August.
Sanderson acknowledged that chicken production was outpacing growth in demand, but said domestic and export demand remains sound.
(For summit blog: summitnotebook.reuters.com/)
(Reporting by Karl Plume, editing by Leslie Gevirtz)
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