US poultry giants absorb feed costs with cost-cutting measures

US chicken producer, Pilgrim’s Pride, is replacing paper towels in company washrooms with high speed dryers in a drive to reduce costs as feed prices rise.

Meanwhile, Tyson foods is to replace freezers with more efficient models, streamlining production, and reducing product movement between plants to help offset feed costs.

US chickens consume more than 1.2 billion bushels of corn a year, or about 10% of the US crop, and with corn prices at nearly $7 per bushel, almost double what they were a year ago, that can hurt profits. Pilgrim’s Pride and Tyson estimate that it will cost each of them about $500 million more annually to feed their chickens.

Pilgrim’s Pride, majority owned by Brazilian meat company JBS SA is the No. 2 US chicken producer behind Tyson. It has initiated a $400 million cost savings program that includes more efficient production methods, new products, and and high-tech blow dryers in washrooms.

Pilgrim’s Chief Executive Bill Lovette found another $17 million in annual savings by recycling shipping pallets.

Corn prices have increased as increasing amounts of US grain is exported or used to make ethanol. Companies are quick to snap up corn when prices drop. For instance, Tyson bought more when corn futures fell nearly 9% to about $6.20 at the Chicago Board of Trade in the days after the March 11 Japanese earthquake.

Source: Reuters