From: Reuters
Published May 15, 2008 12:45 PM

Chicken industry may face $8 corn: Pilgrim CEO

By Bob Burgdorfer

CHICAGO (Reuters) - The U.S. chicken industry, which has been cutting production in reaction to higher feed costs, may have to contend with even higher feed prices this year, Pilgrim's Pride Corp Chief Executive Clint Rivers said during a webcast presentation on Thursday.

"I think today the industry is thinking in terms of placing (chickens) for $6 corn when I think we should realize the potential for $8 corn is certainly there and I think we should be in a position to deal with that," Rivers told analysts at the BMO Capital Markets agriculture and protein conference in New York City.

Pilgrim's Pride <PPC.N> is the largest U.S. chicken producer and recently announced it was cutting production about 5 percent, largely in reaction to higher feed costs.

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The price of corn, an important livestock and poultry feed, hit a record $6 per bushel this year, due to strong demand from exporters, livestock feeders and makers of the biofuel ethanol.

Livestock producers have been worried that corn prices could go even higher if there is any disruption to this year's U.S. corn crop.

To cope with higher feed costs, Rivers said he would like to see a 3 to 4 percent reduction in U.S. chicken production.

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.

To more quickly pass on higher costs to consumers, Pilgrim's Pride recently shortened the duration of fixed-price contracts with grocery stores, restaurants and other customers to as little as 90 days from a year.

Earlier at the BMO conference, Tyson Foods Inc. <TSN.N> Chief Executive Richard Bond said that, because of production cutbacks and higher feed costs, there will be less, but more expensive, chicken on store shelves this summer.

"The lag of higher priced corn is just now coming through the products that we are taking to market," Bond said.

Tyson is the largest U.S. meat company, producing beef, pork, and chicken.

(Reporting by Bob Burgdorfer; editing by Jim Marshall)

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