Cherkizovo, Russia's top meat producer, warned that elevated grain prices could hit profits – but not until next year, forecasting "strong" results in 2012, even amid growing concerns of tighter domestic wheat supplies.
The pork and poultry giant said that the jump in grain prices - which for feed wheat stand at 7,900 roubles a tonne in Russia, up nearly 30% in three months, according to consultancy Sovecon – "raises some concerns".
And the group "there could be resulting pressure on profitability" if the current "stable but high" grain prices "remain at similarly high levels".
The comments came as Russian farm ministry data showed a continued decline in grain yields as harvest hit 71% completion, with the average number falling to 1.85 tonnes per hectare, a drop of 25% year on year, and down from the average of 1.89 tonnes per hectare as up to a week before.
The average wheat yield was, at 1.89 tonnes per hectare so far, had declined further from the 1.95 tonnes per hectare as of the week before, and represented a decline of 30% year on year.
Ideas of tight supplies, implying high prices, were also stoked on Tuesday when only 60,000 tonnes of wheat was tendered to the latest tender by top importer Egypt, compared with more than 400,000 tonnes at the previous event.
Poultry prices soar
However, Cherkizovo said that the impact of any continued strength in grain prices would not kick in before the first quarter of 2013.
Many meat groups see a delayed response to shifts in grain prices, thanks to hedging programmes.
Cherkizovo is also shielded from the open market by its own grain-growing operations, boosted by last year's purchase of Mosselprom and June's $137m acquisition of land in Russia's black earth region, taking the group's landbank to 100,000 hectares.
Meanwhile, the company said it was seeing a boost from "high" pork prices in Russia and from poultry price growth "which has accelerated beyond our expectations".
"This, along with strong demand, will underpin our results for 2012," the group said, forecasting "strong financial results for the full year".
Profits rise ...
Source: Argentine Beef Packers S.A.
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