Poultry processor Pilgrim’s Pride will reduce weekly chicken processing by 5% year over year by January 2007 to better balance supply and demand amid declining chicken prices and sharply higher costs for corn, the company said.
The reduction, representing approximately 1.3m head per week, will begin with eggs set as of today (30 October), and will take effect with weekly processing beginning 1 January , 2007.
“The US chicken industry is subject to volatility and there are a number of factors impacting near-term market conditions. Although industry dynamics improved in the spring and early summer of 2006, market conditions have weakened over the past few months, as evidenced by a decrease in prices for boneless breast meat and leg quarters, as well as a sharp increase over the past two months in the price of corn,” said OB Goolsby Jr, Pilgrim’s Pride president and chief executive officer.
Pilgrim’s Pride said it intends that the reduction will remain in effect until average industry margins return to more normalised levels.
“We believe the reduction announced today will help to strike a better balance between production and demand and strengthen our competitive position. As we have said before, reducing overall supply to better match demand is an important component in helping return the industry to more normalised levels. While the short-term operating environment remains challenging, we are confident that continued demand for high-quality, convenient and low-fat meat proteins will position our company for profitable long-term growth when conditions in the chicken markets improve,” added Goolsby.
The company’s offer to acquire all of the outstanding shares of fellow US chicken processor Gold Kist at US$20 per share in cash, was due to expire at midnight, New York City Time, on 27 October, 2006. Gold Kist’s board had rejected the offer, which valued the Atlanta-based company at around US$1bn, last week, maintaining the offer was not in the best interests of its shareholders.