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Broiler Industry Must Lower Supply, Says Cagle's

by 5m Editor
6 June 2011, at 9:32am

US - Cagle's, Inc. has announced its results for the fiscal year ended 2 April 2011, which included two profitable quarters but a six-month period of high feed prices and flat market prices.

Cagle's, Inc. (Amex: CGL.A) reported a net (loss) of $(0.6) million or $(0.12) per share for fiscal year 2011 compared to net income of $2.5 million or $0.55 per share for fiscal year 2010.

Net sales increased to $310.1 million, up one per cent from fiscal 2010, reflecting an increase in sales pounds of 2.6 per cent and a decrease in sales price of $0.0217 per pound. Quoted markets were variable with boneless breast up 6.8 per cent, tenders up 5.3 per cent, wings down 21.7 per cent and leg quarters down 4.0 per cent. Cost of sales for the fiscal year increased $7.5 million or 2.6 per cent from last year, reflecting higher feed cost of $18 per ton or 7.2 per cent. Fourth quarter feed cost rose $82 per ton or 34 per cent above the same quarter of last year, increasing the cost of sales for the fourth quarter by $11.7 million. For fiscal 2011, feed cost increased by $17.7 million or 18.5 per cent versus fiscal 2010 driven by a 75 per cent increase in our cost of corn.

The first six months of fiscal 2011 provided profitable returns for our company with net income of $6.6 million. However, in the last two quarters of the year, the company experienced the aforementioned feed price increase without a corresponding increase in market prices, producing losses in both our third and fourth quarters. Feed prices continue to present a difficult challenge to overcome. The industry must lower supply in order to offset reduced demand and to support higher market prices. Cagle's continues to process at 80 per cent of capacity at its Pine Mountain Valley deboning facility and does not contemplate any increase in the foreseeable future.

Industry egg sets are beginning to reflect restraint with the latest USDA Broiler Hatchery statement reporting egg sets at 98 per cent, or 3.2 million less eggs for the week ending 14 May 2011. The reported reduction in egg sets would equate to a reduction in supply of approximately 14.4 million pounds of ready-to-cook poultry per week. Continued reductions of this magnitude or larger would be very supportive of industry prices and margins.