Source: Rita Jane Gabbett, MEATINGPLACE, 8/14/15


An unusually rainy summer had analysts expecting USDA yesterday to reduce its U.S. corn crop estimate, but the adage “rain makes grain” appears to apply as the agencyraised its corn forecast, brining poultry producers the prospect of cheaper feed and better margins. 

“No doubt, if realized, lower corn and soybean meal prices could be additive to our current earnings forecasts for Cal-Maine Foods, Pilgrim’s Pride, Sanderson Farms and Tyson Food,” wrote BB&T Capital Markets analysts Brett Hundley, Heather Jones and Omar Mejias in a note to investors. “Such feed values would make us more confident in Tyson Foods being well above its 9 percent margin target for fiscal 2016.”

Doing the math
Using current futures prices as a guide, the analysts noted that $3.60 per bushel corn and $300 per ton soybean meal costs would translate into a broiler feed cost of 29 cents per pound.

If production and feed prices hold at these now expected levels, the analysts predicted these lower feed values could add up to $1.80 in earnings per share to their estimate for Sanderson Farms in fiscal 2016 and could add up to 55 cents per share to their Pilgrim’s Pride fiscal 2016 forecast. 

The Daily Livestock Report had this to say about yesterday’s crop report: “The report certainly was welcome news for livestock producers, promising that feed costs will remain relatively low well into next year and help support the expansion in beef, pork and chicken supplies currently under way.”

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