Cagle's reports FY loss, due to increased feed costs
Cost of sales for the fiscal year increased $7.5 million or 2.6% from last year reflecting higher feed cost of $18 per ton or 7.2%. Fourth quarter feed cost rose $82 per ton or 34% above the same quarter of last year, increasing our cost of sales for the fourth quarter by $11.7 million. For fiscal 2011 feed cost increased by $17.7 million or 18.5% versus fiscal 2010 driven by a 75% 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,” the company said in a statement. “However, in the last two quarters of the year, we 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. Our industry must lower supply in order to offset reduced demand and to support higher market prices. Cagle’s continues to process at 80% of capacity at its Pine Mountain Valley deboning facility and does not contemplate any increase in the foreseeable future.”
The company noted that industry egg sets are beginning to reflect restraint with the latest USDA Broiler Hatchery statement reporting egg sets at 98%, or 3.2 million less eggs for the week ending May 14, 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, it added.
Source: Cagle's Inc.