Speaking during his first quarterly earnings call as the global leader of Pilgrim’s Pride, Penn shared plenty of thoughts about ASF and how it is affecting and can further affect the poultry company with operations in the U.S., Mexico and Europe. The earnings call, which reviewed the financial results for the first quarter of fiscal year 2019, was held on May 2.
Penn, formerly president of Pilgrim’s USA, was promoted to his current position in March.
ASF and its impact on chicken demand
“The spread and evolution of ASF globally could have a significant impact on the fundamental balance of chicken market conditions,” said Penn. “It should drive reduction in domestic availability in competing proteins as well as increased demand for U.S. chicken globally, above and beyond the resolution of any trade negotiations.”
Penn said demand for chicken typically picks up at the beginning of the year, once the holiday season concludes, but he believes the increase in demand and consumption is even more pronounced this year. ASF has played a role in that.
“After promoting beef and pork for much of last year, retailers and (quick service restaurant) operators are back to more normal chicken featuring activities,” he said. “Also, given the evolving global situation of ASF, more pork and beef are moving out of the U.S. and reducing overall domestic availability, which is positive for chicken demand and pricing. We believe these are favorable signals for the upcoming summer grilling season, and we expect to have a further pick-up in demand for chicken.”
ASF affecting feed supplies, prices
Penn anticipates lower feed costs in the near term, and the pig losses caused by ASF are a major factor in that.
“Regions impacted by ASF will likely consume less soy meal, giving us a more benign feed environment,” he said.
Penn said he already sees significant demand losses for corn and soybean meal in China, the country hit hardest by ASF. Since China’s share of the global soybean meal trade is about 75 percent, the disease’s affect on soy meal prices will be greater than its effect on corn. “China’s corn market is much less important to the global corn trade,” he said.
Effects already being felt in Mexico
Of the markets where Pilgrim’s Pride has operations, Mexico is where the effects of ASF were felt first.
With tightening pork supplies, the amount of pork being exported from the U.S. to Mexico has dropped 15 percent on a year-over-year basis, he said, which has had economic effects there.
“We’ve not seen such a price turnaround in Mexico in the last 8 years that I’ve been here, relative to what happened. That’s part of what this ASF has done, just in Mexico, by having less pork going down into that market.”
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