*The U.S. chicken industry will face challenges in the fourth quarter of 2012 due to
ever-increasing grain prices caused by the drought, according to Koch Foods
Inc. CEO Joseph Grendys, and the company's contracts in for 2013 will
reflect the possibilities as adjustable clauses are written in for grain price
fluctuations.
The last time the company sought quarterly adjustments was in 2008, said
Grendys. “Costs have gone up so much due to the drought that the industry will
be forced to get price increases of 10 to 15 percent across all product lines”
for 2013 over this year, he said. Production in the industry as a whole declined
in the first half of 2012 and rising feed costs continue to shrink margins.
Grendys said that while demand for Koch’s chicken
products is “extremely strong,” uncertainty caused by the drought is leading his
company to analyze its sales against the cost of raising chickens. The industry
has reduced production costs over the last decade and can’t count on lower input
costs in the future. He said the industry needs to be smart and focus on pricing if it wants to be profitable in
2013.
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