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Rising Feed Prices Hit Cagle's Quarterly Results

16 February 2011
Poultry Digital - Two weekly eBulletin for the global poultry industry

US - Cagle's, Inc. has announced its results for the third quarter ended 1 January 2011, which included a net loss of $2.2 million, or $0.46 per share, on net sales of $72.0 million for the quarter.

For the comparable quarter a year ago, Cagle's Inc. reported a net loss of $0.3 million, or $0.08 per share, on net sales of $70.4 million.

Net sales for the third quarter were up 2.2 per cent versus the prior year third quarter reflecting an 11.9 per cent increase in pounds sold and a reduction in sales price per pound of 6.9 cents. Quoted market prices of products for the third quarter of fiscal 2011 versus the same period last year were mixed: boneless breast increased 4.8 per cent, tenders decreased 4.5 per cent, wings decreased 20.8 per cent, drums decreased 22.8 per cent, leg quarters increased 7.7 per cent, and whole birds without giblets were quoted 26.2 per cent higher. Discounting from these quoted markets was prevalent especially towards the end of the quarter, as the industry increased production in excess of four per cent as reported by USDA increased egg sets and chick placements.

Cost of sales for the third quarter of fiscal 2011 of $71.2 million increased 6.3 per cent as compared to prior year third quarter, reflecting an increase of pounds processed of 10.6 per cent largely influenced by the gain in the bird size processed at the Pine Mountain Valley facility. Feed ingredient prices for broilers processed in the third quarter of fiscal 2011, which represented 39 per cent of the total cost of sales, increased 18.6 per cent as compared to the third quarter of fiscal 2010.

Feed ingredient prices continue to challenge the company and industry, as it experienced a 30 per cent increase in the price of corn coupled with a 22 per cent increase in the price of soybean meal since the start of the third quarter. The increases comes as the company's farmers have delivered their third largest corn crop ever of which 40 per cent is now being used to generate ethanol as mandated and subsidised by the government. Farmers produced the second largest soybean crop in Cagle's history. As influenced by current fiscal policy, the US dollar is worth less and less on the world market, which is supportive of increasing exports of this critical feed ingredient resulting in the lowest stocks-to-use ratio of soybean since the mid-1960s.

Entering into the company's fourth quarter, the industry has shown restraint with current egg sets now close to equal those of last year. Competing protein prices are heading to record highs as the consumer is beginning to feel the impact of higher feed cost. In its third quarter, Cagle's began a 20 per cent cut-back in production at the deboning operation in an effort to balance supply and demand. It says it is optimistic that the industry will exhibit the production restraint necessary to support higher pricing for Cagle's products allowing for return to profitable margins.

For the first 39 weeks of fiscal 2011, the company reported net income of $4.4 million, or $0.96 per share, on net sales of $233.7 million. For the comparable period of fiscal 2010, which was a 40-week period, the company reported net income of $1.6 million, or $0.35 per share, on net sales of $236.0 million.

ThePoultrySite News Desk



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