Tough times in U.S. livestock business not over

By Bob Burgdorfer

CHICAGO, April 14 (Reuters) - Chicken producer Pilgrim's Pride Corp (PPC.N: Quote, Profile, Research) said on Monday it was cutting production for the second time in a month, due to high feed costs, sending its shares and those of competitors Sanderson Farms Inc (SAFM.O: Quote, Profile, Research) and Tyson Foods Inc (TSN.N: Quote, Profile, Research) higher in morning trading.

While that action may have pleased share holders on ideas less meat should drive up prices and help profits, it also demonstrated that chicken producers continue to struggle with high costs for feed and fuel.

Pilgrim's Pride, the largest U.S. chicken producer, said the combined production cuts announced last month and Monday will amount to about a 5 percent reduction in output.

Cattle and hog producers are also struggling with the higher costs and, like chicken producers, will likely cut production in order to cope.

"We should see hog producers continue to have losses through the rest of the year. Poultry and cattle producers may recover by the second half," said Rich Nelson, an analyst with Illinois-based agriculture advisory firm Allendale Inc.

The production cuts throughout the meat industry should eventually drive up supermarket meat prices, economists and analysts said, but it will probably be 2009 before that happens.

POOR EARNINGS SEEN FOR MEAT COMPANIES

Pilgrim's Pride is scheduled to report quarterly earnings on May 5, and analysts, on average, expect it to post a loss of $53.5 million, or 81 cents per share, compared with a year-earlier loss of nearly $30.7 million, or 46 cents, according to Reuters Estimates.