Jennie-O takes measures to mitigate high feed costs

Because of increased feed and grain prices, Hormel Foods is taking pricing action and reformulating its feed to offset those added expenses for its Jennie-O Turkey Store subsidiary, company executives said.

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(Andrei310 | Bigstock)
(Andrei310 | Bigstock)

Because of increased feed and grain prices, Hormel Foods is taking pricing action and reformulating its feed to offset those added expenses for its Jennie-O Turkey Store subsidiary, company executives said.

“Strong Chinese demand and drought conditions in South America continue to generate higher grain prices, which is expected to negatively impact Jennie-O Turkey Store,” Hormel Foods Chief Financial Officer Jim Sheehan said during a quarterly earnings call on February 18. “The primary factors we are watching are global demand, planting intentions for the coming season and weather conditions in South America.”

Presently, Sheehan said the price of corn is up by a higher percentage than the price of soybeans.

“So, as you can imagine, we’re moving the formula to more of a soybean meal-based formula away from corn. That will offset a portion of the cost,” he said.

But reformulating the feed will only go so far to help Jennie-O Turkey Store’s bottom line.

Jim Snee, president, chief executive officer and chairman of Hormel Foods, said pricing action will also be part of the strategy in the coming year.

“Jennie-O Turkey Store is proactively taking price increases across all categories in order to offset rapidly increasing grain costs. While I am confident in our pricing power and expect margins to stabilize in the back half of the year, continued escalation in grain prices will require additional actions,” said Snee.

Financial results for first quarter

During the call, Snee and Sheehan also provided commentary on Jennie-O Turkey Store’s financial results for the first quarter of the 2021 fiscal year.

For the quarter, which ended on January 24, Jennie-O Turkey Store’s volumes were down 2%, its net sales were up 1% and the segment’s profit was down 30% when compared to the first quarter of the 2020 fiscal year.

“Most encouraging was the sales growth we saw from the Jennie-O brand. Every major retail category, including Jennie-O Lean Ground, turkey burgers, oven-ready items, bacon and marinated meats grew. The Jennie-O brand continues to resonate with consumers, and the efforts we have made on gaining back customer distribution are paying off,” Snee said.

However, the decline in profits, according to Snee, were brought on by a combination lower foodservice sales, increased supply chain costs related to the COVID-19 pandemic, higher freight costs and higher feed costs.

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