- The Washington Times - Thursday, July 13, 2006

The poultry industry says the U.S. demand for chicken has remained strong despite a lagging export market in countries where bird flu has been reported.

“No one that we’ve spoken to has reported any impact from avian influenza,” said Richard Lobb, spokesman for the National Chicken Council, a Washington trade group. “The public is very well aware of bird flu but there’s really been no measurable impact on demand for chicken in the United States.”

Overseas exports, on the other hand, took a major hit in the fall as populations in Turkey, Romania, Ukraine and other countries with confirmed cases of bird flu became averse to chicken altogether, Mr. Lobb said.

“When the domestic market in a country like that is down sharply, you can’t sell the local fresh product [and] it is very difficult to sell the imported frozen product — consumers just shy away,” he said.

In response to weak sales overseas, the country’s No. 2 poultry producer, Pilgrim’s Pride Inc. of Pittsburg, Texas, on Wednesday said it was cutting production at its Timberville, Va., plant by 10 percent this year “to better balance production with demand,” spokesman Gary Rhodes said. The cutback is part of a plan to reduce overall production by 3 percent this year.

“The exports for much of this year have been very weak and at the same time, that has led to higher inventory levels and has contributed to lower overall prices for our products,” Mr. Rhodes said.

For the most recent quarter ending April 2, the company posted a net loss of $32 million (48 cents per share), compared with earnings of $56.4 million (85 cents) the previous year.

In the United States, the oversupply of chicken caused prices for both breast and leg meat to fall 30 percent during the quarter.

In a letter to affected plant employees, Pilgrim’s Pride said it hopes to return to normal operations by early next year.

The production cutbacks “are absolutely necessary in order for the company to return to profitability and ensure our long-term success — and your job security,” the company said.

In a similar bid to return to profitability, Tyson Foods Inc., the country’s top poultry producer, yesterday said it will lay off 420 employees and eliminate 430 positions that are not currently filled, at an estimated cost savings of about $200 million.

“We realize we can’t save our way back to profitability,” Chief Executive Officer Richard L. Bond said.

The Arkansas company posted a net loss of $127 million (37 cents) for its most recent quarter ending April 1, compared with a net income of $76 million (21 cents) a year ago.

Tyson, the world’s biggest beef producer, attributed the plunge to mad-cow disease concerns as well as bird flu.

There may be a light at the end of the tunnel, however, as analysts speculate the European market is beginning to bounce back as there haven’t been recent reports of additional bird-flu outbreaks on the Continent.

Despite setbacks early in the year, chicken exports are projected to be 5.5 billion pounds at the end of this year, up nearly 7 percent from last year, according to a June report put out by the USDA.

Diane Geissler, an analyst for Merrill Lynch, raised annual earnings guidance for both Tyson and Pilgrim’s Pride in a July 6 note to clients, acknowledging that “component prices have improved” due to “improved export demand, seasonally stronger domestic demand as well as lower inventory levels and production cuts.”

U.S. chicken restaurant chains say their customers have faith in the precautions taken by chicken processors, who have implemented numerous safeguards to prevent the transmission of avian flu by farm employees or migrant birds.

“We’ve been pretty much unchanged. We’re actually having a very good year,” Chick-fil-A Inc. spokesman Don Perry said.

“It’s business as usual,” said Alicia Thompson, spokeswoman for Popeye’s Chicken and Biscuits. “I think at this point consumers are feeling fairly confident that there is no threat to the U.S. poultry supply chain.”

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