Chicken Production Could Be Cut 3% by Summer

Pilgrim's Pride's announcement this month that it will close a North Carolina production facility along with six distribution centers is likely the first of many similar moves that will be made by poultry processors this year, as producers attempt to curtail supply to improve industry fundamentals. The ethanol boom has caused corn and animal feed prices to skyrocket during the past two years,

NEW YORK — Pilgrim's Pride's announcement this month that it will close a North Carolina production facility along with six distribution centers is likely the first of many similar moves that will be made by poultry processors this year, as producers attempt to curtail supply to improve industry fundamentals. The ethanol boom has caused corn and animal feed prices to skyrocket during the past two years, significantly raising input costs for meat, poultry and egg producers. Yet with supply remaining relatively steady, producers have had trouble passing along price increases significant enough to keep pace with those costs. “Our company and industry are struggling to cope with unprecedented increases in feed-ingredient costs this year due largely to the U.S. government's ill-advised policy of providing generous federal subsidies to corn-based ethanol blenders,” Chief Executive Officer J. Clint Rivers said in a statement. In research notes published by Dow Jones, analyst Robert Moskow with Credit Suisse said that Pilgrim's Pride's North Carolina facility represents about 1.5% of the company's processing capacity, and about 0.4% of total industry capacity. Analyst Pablo Zuanic with J.P. Morgan Securities described the move as positive for the industry, and said he expected similar cuts at other processors to total about 3% of industry capacity by summer, based on historical trends.