cryptogon.com

Pilgrim’s, which produces 25% of U.S. broilers, suffered a triple whammy of large debt, high feed prices and lower prices for chicken amid weakening demand in the U.S. and abroad.

“Pilgrim’s Pride stretched and got caught,” says Len Steiner, owner of meat and food consulting firm Steiner Consulting.com.

While other producers are in stronger financial shape, the hangover from high feed costs and weak demand is affecting all producers, he says.

Pilgrim’s Pride shares fell 46% Monday to 62 cents before trading was halted pending its announcement. Shares of No. 2 Tyson Foods (TSN) fell 10% to $6.03.

Steiner expects higher wholesale prices for chicken in the coming months as producers continue to cut production. It’s unclear whether those increases will get to consumers given the weak economy, he says.

Pilgrim’s Pride’s filing wasn’t a surprise, but there was hope last week that it could be avoided. It said in September it would post a significant loss in its fiscal fourth quarter. Pilgrim’s Pride, which employs 48,000, says it’ll operate as usual while it restructures.

It hasn’t said whether it will cut production. JPMorgan Securities analyst Ken Goldman said in a research note Monday that cuts were likely. A steep reduction would help the “downtrodden industry” lift prices, he wrote in a note last month.

The economics facing the industry have been brutal. Corn prices were more than triple their five-year average in June, Steiner says. Meanwhile, wholesale chicken prices were off their five-year average by 16.2%.

Corn prices have fallen 55% since then, and producers, except for Tyson, have cut production.