Costly grain forces Hormel to lift prices
US turkey producer Hormel Foods Corp said at an
investor conference that it plans to raise prices again on its Jennie-O turkey
products due to higher grain costs.
The company noted at the Wachovia Securities CEO Summit that its Jennie-O
Turkey Store division saw its operating profits drop by nearly half to about $14
million in its second quarter despite a rise in sales.
Chief financial officer Jody H. Feragen said the division raised prices by
about 2% in that quarter, but a 4-5% price increase was really needed to cover
the increasing cost of corn. She said "competitive pressures" made it difficult
to institute a higher price increase then.
Corn prices have skyrocketed to near $4 per bushel due to the rising demand
for the alternative use for fuel ethanol.
Feragen said every 10 cent increase in the cost of corn equals about $3.5
million more in costs for the subsidiary.
"We really need to see 4-5% increase in price to recover all the costs
related to corn," she said. "We expect them to continue to see price increases
in the third quarter and in the fourth quarter."
At the conference, Feragen also said the company may look for investments
to grow its business, including acquiring businesses and making internal
"We are very conservatively leveraged, so I think there is ample
opportunity to add debt to our portfolio either through acquisitions or other
investments," she said. "We do see a sweet spot in the $50-150 million
To comment, login here
Or register to be able to comment.