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The next shoe is dropping in the drought crisis.Higher corn prices are crushing the companies that make chicken, eggs, and other meats.
Big time poultry player Sanderson Farms fell 5% just today.
Over the past month, shares of chicken producer Pilgrim’s Pride (US:PPC) have tumbled 24%, while rival Sanderson Farms (US:SAFM) is down 20%. Tyson (US:TSN), which also sells beef and pork, is off 11% over the same period.
Corn shortages aside, higher prices are a margin killer.
With forecasters including AccuWeather Inc. predicting worsening conditions in the next month, corn traded in Chicago surged by $2.6525 a bushel since mid-June, or 52 per cent. The rally is adding to pressure on the livestock industry because cattle feedlots are already losing as much as $200 an animal. Sanderson Farms Inc. (SAFM), the third-largest U.S. poultry producer, said every 10-cent corn increase boosts costs by $2.21 million.