Pilgrim's Pride underestimated U.S. meat supplies, hurting earnings

Pilgrims Pride

09/02/2023 18:04

By Tom Polansek
       CHICAGO, Feb 9 (Reuters) - Pilgrim's Pride Corp  PPC.O ,
one of the biggest U.S. chicken companies, underestimated meat
production at the end of last year, Chief Executive Fabio Sandri
said on Thursday after the company reported a surprise quarterly
loss.
    The company, owned mostly by meatpacker JBS SA  JBSS3.SA ,
joined rival Tyson Foods Inc  TSN.N  in misjudging that lower
beef and pork supplies would increase demand for chicken as
consumers grapple with high inflation.
    Pilgrim's shares still rose by 5% as the company said it
expects beef supplies to shrink later this year and is now
seeing some consumers switching to chicken.
    Executives expected total meat supplies to tighten toward
the end of 2022 because U.S. ranchers slashed the size of the
cow herd while avian flu wiped out millions of turkeys, Sandri
told analysts on a call.
    As a result, Pilgrim's ramped up chicken production by
placing more eggs into incubators for birds that came to market
as food in the quarter ending in December, he said.
    "The whole industry started placing more chicks," Sandri
said.
    However, retail chicken demand rose by just 1% because of
higher-than-expected beef and pork supplies while the
availability of retail, or case-ready, chicken meat jumped by
8.5%, Sandri said. At the same time, the availability of chicken
for commodity, or "big bird," markets increased by 12%, he said.
    "All this 20% more production in the big bird and the
case-ready segment ended up in the foodservice segment and the
commodity segment, which pressured the price to levels that we
have never seen," Sandri said.
    He added there was "total protein availability much higher
than anticipated."
    Chicken prices will stay below last year's levels through
the first half of 2023 but trend higher in the second half,
Rabobank said. 
    Pilgrim's Pride reported a quarterly adjusted loss of 49
cents​​ per share, compared to earnings of 56 cents a year
earlier. Analysts expected earnings of 2 cents per share.
 (Reporting by Tom Polansek; Editing by Josie Kao)
 ((Thomas.Polansek@thomsonreuters.com; https://twitter.com/tpolansek))