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.