CHICAGO May 15 U.S. consumers can add chicken
to the list of foods that will cost more this year.
Prices on everything from soup to nuts have moved higher as
food companies pass on to consumers sharply higher costs for
grain, meat, and fuel.
Chief executives at the two largest U.S. chicken companies
said on Thursday that chicken prices must go higher to offset
the industry's higher production costs.
A swift rise in the price of corn, a major feed stock, has
been particularly troublesome.
Chicken companies have been unable to raise chicken prices
fast enough to offset the higher feed costs, Richard Bond,
chief executive at Tyson Foods Inc (TSN.N), said on Thursday.
"We have attained some (higher) pricing but not at the same
pace as our inputs have increased, especially in chicken. The
lag of higher priced corn is just now coming through the
products that we are taking to market," Bond said during his
webcast presentation at the BMO Capital Markets agriculture and
protein conference in New York City.
Tyson is the largest U.S. meat company and the second
largest U.S. chicken producer. Feed costs for the company
should be $600 million higher this fiscal year than the
previous year, said Bond.
Corn prices have soared to a record $6.50 per bushel this
year amid strong demand from exporters, livestock and chicken
producers, and the makers of the biofuel ethanol.
SUPPLY REDUCED, CONTRACTS CHANGED
In order to raise chicken prices enough to offset these
higher costs, Pilgrim's Pride Corp PPC.N, the largest U.S.
chicken producer, has cut production 5 percent and shortened
contract terms with customers.
"Prices of grain have escalated so quickly this last fall
and into the first part of the year that we have been unable to
efficiently pass those prices along as quickly as they have
gone up," Pilgrim's Chief Executive Clint Rivers told the BMO
To more quickly pass on the higher costs, Pilgrims just
recently shortened contract terms with customers to 90 to 180
days from previous year-long terms.
While Pilgrim's has reduced production 5 percent, Rivers
said the industry, as a whole, needs to cut production 3 to 4
percent to generate the higher prices needed to cover costs.
Recently the industry has reduced by 2 to 3 percent the
number of eggs and young chicks placed in the production cycle,
but it will be early this summer before that reduced supply
reaches grocery stores.
"In the summertime we usually have our strongest demand for
chicken, so typically you would not expect to be seeing egg
sets drop this time of year. So I think it is pretty
significant," said Rivers.
"We should begin to see some supply affected by this (drop
in egg sets) in June," he said.
(Reporting by Bob Burgdorfer; editing by Jim Marshall)