“Chicken prices will rise as a result of reduced production in our industry,” helping the company’s profitability, Sanderson said in a telephone interview, reports Bloomberg. The Laurel, Mississippi-based company plans to cut production by 4 percent starting at the end of this year and into 2012, he said on a conference call with analysts.
Sanderson said that improved profitability will come from supply cuts rather than rising demand.
“We don’t see a significant improvement in demand until unemployment improves, and we don’t see anything on the horizon where that is going to improve,” Sanderson said.
Sanderson said that the company is putting plans for a second chicken plant in North Carolina on hold “indefinitely,” and that project may be delayed until the next corn harvest in autumn, 2012.
“I am disappointed that we have to wait,” Sanderson said. “It will be when we return to profitability first, and we pay down some of our debt and the U.S. makes a good corn crop and the price of input costs, corn and soybean meal, comes down.”
Analyst reports state that the poultry industry may have reached its bottom in July and that it will take six months for profits to recover. U.S. chicken production should be down at least 3 percent in August, a level of cuts not seen since October 2009, said Jeff Farmer, a Boston-based analyst for Jefferies & Co.