Rising feed costs lead to Cagle's net loss
June 6, 2011
by Meat&Poultry Staff
ATLANTA – Rising feed costs led to Cagle's Inc. suffering 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, however, increased to $310.1 million, up 1 percent from fiscal 2010, reflecting an increase in sales lbs. of 2.6 percent and a decrease in sales price of $.0217 per lb.
For fiscal 2011, the company’s feed cost increased by $17.7 million or 18.5 percent vs. fiscal 2010, driven by a 75 percent increase in the cost of corn.
During the first six months of fiscal 2011, Cagle’s realized some profit, with net income of $6.6 million. However, in the last two quarters of the year, the company experienced the pre-mentioned feed price hikes without a corresponding increase in market prices, which resulted in losses in both its third and fourth quarters.
Feed prices continue to present a difficult challenge. Industry must lower supply in order to offset reduced demand and to support higher market prices. Cagle's continues to process at 80 percent of capacity at its Pine Mountain Valley deboning facility and does not contemplate any increase in the foreseeable future.
Quoted markets were variable with boneless breast up 6.8 percent, tenders up 5.3 percent, wings down 21.7 percent and leg quarters down 4.0 percent, the company said.
Cost of sales for the fiscal year increased $7.5 million or 2.6 percent from last year reflecting higher feed cost of $18 per ton or 7.2 percent. Fourth-quarter feed cost rose $82 per ton or 34 percent above the same quarter of last year, increasing our cost of sales for the fourth quarter by $11.7 million.
Industry egg sets are beginning to reflect restraint with the latest USDA Broiler Hatchery statement reporting egg sets at 98 percent, or 3.2 million less eggs for the week ending May 14. The reported reduction in egg sets would equate to a reduction in supply of approximately 14.4 million lbs. of ready-to-cook poultry per week. Continued reductions of this magnitude or larger would be very supportive of industry prices and margins, the company concluded.