Good morning, and welcome to the Second Quarter 2012 Pilgrim's Pride Earnings Conference Call and Webcast. [Operator Instructions] At the company's request, this call is being recorded. Please note that the slides referenced during today's call are available for downloading from the Investor Relations section of the company's website at www.pilgrims.com. After today's presentation, there'll be an opportunity to ask questions. I would now like to turn the conference over to Rosemary Geelan, Investor Relations for Pilgrim's Pride. Please go ahead.

Good morning. Thank you for joining us today to review our operating and financial results for the quarter ended June 24, 2012. This morning, we issued a press release providing an overview of our financial performance for the quarter, including a reconciliation of any non-GAAP measures we may discuss. A copy of the release is available in the Investor Relations section of our website along with the slides we will reference during this call. These slides are also filed as an 8-K and are available for download at sec.gov. Presenting to you today are Bill Lovette, President and Chief Executive Officer; Fabio Sandri, our Chief Financial Officer; and Charles Von Der Heyde, our Head of Commodity Risk Management & Export. Today's call will focus on the progress we've achieved towards our operations goals, a discussion of the macro factors impacting our industry and the key drivers of our financial performance for the quarter. After we conclude our prepared remarks, we'll be happy to take your questions. Before we begin, I would like to remind everyone that today's call will contain certain forward-looking statements. Our actual results might differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause these actual results to differ materially from forward-looking statements are outlined in today's press release, as well as in many of our regular filings with the SEC. I will now turn the call over to Bill Lovette to begin our prepared remarks.

Thank you, and good morning. We appreciate you joining us to discuss our second quarter results. EBITDA for the quarter was $125.1 million compared to a negative $47.4 million in the same quarter of 2011. Our net sales totaled almost $2 billion, up slightly over our 2011 sales of $1.9 billion. We recognized a higher margin on reduced volumes year-over-year, consistent with the margin levels we've stated were achievable. We generated a positive net income of $69.4 million for the quarter for diluted earnings per share of $0.27. In the second quarter of 2011, we recognized a net loss of $128.1 million or an adjusted $0.57 per share. Heading into the second half of the year, we see a more challenging environment. Market prices have been lackluster, while simultaneously, feed costs have been rising. This is something our industry needs to solve. The price of feed ingredients will continue to be volatile, and we will not be able to rely on cheap -- relatively cheap corn and soy meal to drive profitability. It's up to producers to ensure that the supply does not exceed existing demand by maintaining discipline. If corn is to be rationed, all proteins and grain-based foods will participate in the rationing process. The chicken industry will not be the only ones impacted, America and the rest of the world will face the consequences of the drought and the ethanol mandate through food inflation. Each quarter for the past year, I've talked about our strategy as we've developed and again executing against it. I'd like to share an update of how we're progressing and where we still see opportunities. In pursuit of operational excellence, we established a goal of $200 million of cost savings and mixed improvements for 2012. We've realized $115.7 million year-to-date, which puts us…

Thank you, Bill, and good morning, everybody. We are well aware of the dramatic changes in the corn and soybean supply-demand figures that is during the last 30-plus days, caused by what is now called one of the worst weather disasters in decades. From the USDA June report, to what most now in the market uses potential yields, the size of the corn crop has been trimmed by more than 2.5 billion bushels, while the soybean crop has been trimmed by more than 250 million bushels. The weather still holds key importance in the coming weeks to determine what the final yields are going to be, and we are watching it very closely. Carryouts do look extremely tight now, and there is no doubt that worldwide demand rationing will have to occur. As a matter of fact, the negative USDA weekly corn export sales released this week might be the first sign that demand rationing has already started. This is absolutely needed, and that's what I would call the market's function. It's also important to remember that against most currencies, the U.S. dollar is, on an average, 15% stronger than the same time last year. That means that corn importers are paying about 15% more in their local currency, on top of what the market has ready. Alleviating some of the U.S. tight corn situation in the coming 4, 5 months is the fact that Brazil's winter corn crop production, due to a surprisingly record high, surpassing initializing it by almost 250 million bushels. In fact, current Brazilian FOB corn prices are above $1.30 per bushel cheaper than U.S. FOB corn prices. That has triggered the U.S. corn purchases from Brazil over the last 4 weeks. Although no official figures are published yet, our estimate is that 12 million to…

Thank you, Charles, and good morning, everyone. Our second quarter net sales of $2 billion reflect an increase over the $1.9 billion reported in the same quarter of 2011. The increase will be higher after taking to account the disposal of our U.S. distribution business and LifeLock operations, which will have added $30 million to this quarter. Despite the $23 million impact in feed ingredient when compared to last year and a 1% lower volume in the U.S., we have seen a margin increase in the quarter, driven by better sales mix and better sales prices and the achievement of our goals, improving $200 million in savings in plants and cost yield. Our EBITDA of $125.1 million show a significant improvement over the prior year's loss of $47.4 million. EBITDA margin in U.S. reached 6.6%, while in Mexico, it achieved 3.9%. Included in these numbers are a noncash loss of $8 million in Mexico due to the impact of exchange rate fluctuation in the Mexico balance sheet and incurred losses of $5 million in the international markets due to the changing regulation in China. Adjusting for these nonrecurring events, EBITDA margins in U.S. and Mexico will be 6.9% and 8%, respectively. Our net income of $69.4 million resulted in earnings per diluted share of $0.27 compared to the loss of $128 million or an adjusted $0.57 per share in 2011. This quarter, we generated operating cash flows of $51 million despite an increase in inventories, due to a slowdown on the internal market and the changing regulation China during June, and the increase in live cock due to the increase in feed ingredient cost. Consistent with our debt reduction goals, almost all free cash flow was applied against our revolver. We have improved our net debt position from $1.4 billion…

[Operator Instructions] Our first question will come from Heather Jones of BB&T Capital Markets.

My math shows that it looks like you've narrowed your performance in U.S. relative to the industry during Q2. I was wondering if you can give us an update on where you believe you stack up relative to the industry right now in your U.S. operations?

Well, we're pleased, Heather, with our progress. We're not where we want to be, but I think, in terms of growing chickens, processing chickens and selling chickens, we're as good as the average company thereabout. That's not our goal. We want to be far better than the average company, and we have a plan in place to get that done.

And in your prepared remarks, you talked about -- you kept on talking about matching supply and demand, but then you talked about there needed to be demand rationalization on the corn side or feed side. I was wondering if you can give us a sense of how much you think the industry needs to cut, given the future strip for corn and soybean meal. And then on a company-specific basis, your volumes in the U.S. were down just -- or less than 3%, and some of that was due to discontinued ops. So I'm trying to wrap my brain around how much your volumes were down in the U.S. and just if you could give us forward-looking color on Pilgrim's, specifically, as far as production cuts in the U.S.

I'll start with the first question about how much we think the industry has to cut to overcome the rapid increase in corn and soy. The truth is, I don't really know the answer to that question. But I'll go back to as recently as about 1 year ago when the industry was in the process of cutting production, and the industry got down to between $180 million and $185 million egg set per week. And as a result, through January, February and on into late spring, the industry realized a double-digit, approaching 20%, composite price increase. If you look at the current situation, we believe there's going to have to be almost half of that same type of percentage increase to overcome the cost of corn and soy at this time. And as Charles said, the prices may change as we finish this calendar year. But I think it's reasonable to conclude that if the industry were to get back to the 180 million to 185 million egg set on a weekly basis, then we could see another round of price increases as a result of that moving into late in the year and early in 2013. As far as Pilgrim's specifically, Heather, I think you know well we don't disclose exactly our production levels, but I would remind you that it's been our strategy for the better part of 2 years to ensure that we have our supply in balance with profitable demand, and we'll continue to be very disciplined with regard to that.

Our next question comes from Bryan Hunt of Wells Fargo Securities.

Actually, your comments there make a great segue into my question. If you go back to 2011, the company strained with oversupply and the industry did as well, and the company's still a significant amount of the fixed price contracts with higher feed and oversupply in the industry. I was wondering, could you discuss your contract types today. I know you -- the company worked hard to develop a variable price contracting strategy. With corn moving up or feed cost moving up overall, do you believe you're better suited with your contract mix today than you were 2 years ago to handle this type of environment?

Good question, Bryan, and I will answer that by saying, absolutely, we're better positioned as a result of the great work our team did last year in changing our pricing strategy. And I would remind you back to our comments in previous quarters that we fundamentally don't have 12-month fixed pricing contracts any longer. We shortened up the time periods, we put portfolios of business on market-related matrices. We also tied some of our contracts to changes in the underlying commodity market. So we've done a number of things to improve our pricing impact and our mix impact. And I think that it's borne out in our results. We'll continue to keep that as a strategy and price our products such that we're able to share market risk.

And then my next question is, with regards to export sales, as well as working capital. I know exports, you showed us in your presentation, you're up -- running up about 3%. That's one of the company's big strategies. Can you talk about what you saw in terms of export growth on a pound as basis in this quarter, what your outlook is and how that may tie in to the higher inventory number that you saw in Q2?

It's Charles here. The export for Q2 volume have been based in line with same time last year. But the value has been up by almost more than 21%. So we have kind of maintained our volumes and increased price through market price itself and through a better mix as well. We are selling more what we call value added growth, not necessarily only fully-cooked which we basically doubled well from where we were last year, but we're also doing some of our products in -- packaged in a better way or size and stuff like that. So volume's more or less in line with last year, which was already very high compared to 2010. But value is definitely -- price performed definitely higher like more than 20%.

Yes, both our dollar revenue and our unit price per pound are up double-digit, to Charles' point. To your other question, what was your follow-up to that, Brian?

On the working capital.

On the working capital, I'll let Fabio comment, but I'll hurry on to say that we noticed that in June, demand dropped from where it was in May. And we had a commensurate small build in inventory in finished product as a result. But our team has put up a process in place that those finished goods inventories will be back down to our target levels by the end of this current quarter.

Bryan, also affects on the inventory is the cost of life. As we feed more expensive corn and soy meal to our bird, our live inventory goes up. So it was a factor in this quarter as well.

Our next question comes from Farha Aslam with Stevens.

If you have your grain hedged through the fiscal third quarter, why don't you expect the higher grain prices would actually hit your P&L, given your inventories, et cetera?

As the corn and soy -- and it was earlier for soy as opposed to corn, as Fabio just reminded everyone, our costs have been increasing through the second quarter of the year. We did have physical corn bought in some future's positions that is going to help us in the third quarter as we said relative to current market prices. And then as we go further into Q4, our cost of goods sold will be more reflective of the market at that time. Although we continue to use all of our tools available to mitigate that risk and manage our risk, I think our team has been very effective in doing that, both in physical buys on forward corn and soy and in the use of derivatives.

And then if you look at the industry and their need to rationalize, are you seeing any signs of the industry beginning to rationalize and getting back to that $180 million to $185 million egg set? What were the signs that we need to watch in terms of hen slaughter, et cetera, that will point us that the industry is headed that direction?

Well, I would tell you that throughout this entire year, the industry has been relatively well disciplined, staying underneath 2011 production levels. And I believe that the industry recognizes what happened in 2011 as a result of overproduction, coupled with far more than expected cost increases and volatility in corn and soy market. And I believe that will help us be more disciplined as we know that our cost is going to be higher. As far as the hen flock goes, our hen flock size is as low as it's been since 1996, albeit more productive. But we have not, as an industry, been placing more pullets in the field than we had 1 year ago, so that again, will help us be constrained and disciplined.

Our next question comes from Reza Vahabzadeh of Bank of Montréal.

Actually, it's at Barclays. As far as price realization and industry pricing trends, how did price realization for you trend in the second quarter as compared with your expectations at the beginning of the quarter? And then, how would you anticipate industry pricing to move forward on a -- in the next quarter or 2, just given your comments around lackluster demand, albeit production levels, are restrained compared to last year?

As we've been reminding everyone, we change our pricing strategy to a portfolio more reflective of the chicken market. And prices were increasing at a healthy rate in April and May, but began to fall off in June. And as I've said, we saw demand softening, and therefore, prices softened as well. We've seen prices stabilize somewhat in July. We saw some strengthening in some components in July. We expect, especially on wings and tenders and leg quarters, to see some more strength as we go forward through Labor Day and perhaps beyond. As far as breast meat goes, breast meat is fairly well-supported at today's current market. Should we get heat as we typically do in summertime, we'll see breast meat market strengthen commensurate with that. And I think that about covers it.

Our next question comes from Ken Zaslow, Bank of Montréal.

My first question is, in the 10-Q, you guys said market prices for chicken prices are currently at levels sufficient to offset the higher cost of food ingredients. Can you talk about -- is that because your hedges, is that on an operating level, gross profit level, EPS level, can you talk about that? It's a pretty strong statement.

Oh, that was for Q2. And we believe that as we mentioned, we have our grain covering Q3, that will be also true. For the new crop and Q4 prices, there are still some uncertainty. And the industry needs to be disciplined to, again, manage supply and demand for that to be true.

Okay. But it's for Pilgrim's Pride, not for the industry?

Yes. As Bill said, we are in the average of the industry, so we believe that we are also talking about the industry. But, yes, it is true.

If that's the case, what would be the process to which we would actually see production cuts? Why would there be a rationing if there is a -- given the current curve and given what you're saying about the current pricing environment, why would there be a rationing if basically the average company is operating in a -- on the profit side?

Ken, it's -- it basically comes down to the old crop price versus the new crop price. And as you're feeding birds with old crop corn at levels that, that crop was purchased, and then as you move into the new crop, which is significantly higher in price, then you have a different ballgame. And if you pencil out a breakeven using the future's curve, then you realize that prices have to go up. And I think recent history has told us that the only way that prices are going to go up in this business is if the industry remains disciplined in its supply and keeps supply and demand balanced. And that's why we have the position that we have.

Our next question is from Carla Casella of JPMorgan.

I had just 1 question on the -- can you talk about sequential food service demand versus Retail. And if you're -- you mentioned you gained 1 new big customer, was that in food service or in Retail?

It was in food service. We've seen food service demand very choppy. Some food service operators have had great results, others have had very different results. And so it's -- it really comes down to the specific portfolio that we or any other company may have. And -- but on the whole, food service demand has been relatively flat. We don't see, going forward, a reason to be enthusiastic about growth in food service, despite chicken having probably more of its fair share in promotional activity versus the last 18 months or so. From a Retail standpoint, we've seen features of breast meat up double digits, in the neighborhood of 12% in 2012 versus '11. Boneless thigh meat, as an example, feature activity is up about 24% year-over-year. So we've had a lot of feature activity, but that hasn't translated into a very high percentage of demand growth even at Retail.

Do you have a sense for why? Is it that there are more features on other meats or do you think we've saturated those markets?

I think consumer confidence is a big reason. Consumers are still nervous and unsure about the future unemployment remaining at a very high level historically has also played a part. And then the economic situation globally has played a part as well. There's just a lot of uncertainty with consumers right now.

Okay. And then on the hedging side, can you give a sense for when did you hedge in third quarter, and if you hedged it all for fourth quarter or what you're thinking at the current levels we're seeing in the market?

Well, we don't disclose our current positions. We employed a combination of both physical buying forward and the use of derivatives. And we thought, as the market thought, we were going to have a cheaper corn price in the new crop, that turned out not to be the case with the drought that Charles mentioned earlier. And that's really all we can say about our strategy going forward.

Our next question comes from Mary Gilbert of Imperial Capital.

This is Daniel Bonds [ph] in for Mary Gilbert. I was wondering, given the speed with which grain prices have risen, and what current levels may mean for we are on the demand elasticity curve, what that means in terms of your sensitivity to corn, is it still roughly $2 million in EBITDA for every $0.01 change in corn price?

Well, we purchase approximately 4.5 million bushels of corn per week. So that gives you the math on that. Kind of about 40,000 tons of soybean meal.

But, I mean, for every $0.01 change that we've last seen in either corn or soy, what should I think about that impacting your EBITDA?

We haven't given that guidance, and it's really a hard question to answer because chicken prices have a huge vote in that, too. And that's why we continue to talk about the need for supply discipline and making sure that we operate in an environment where we are able to realize increased chicken prices to offset the rising corn and soybean meal.

I mean, I realize it's a difficult question that's kind of why I had alluded to trying to get a sense for where you are in terms of the demand elasticity that you're seeing. I think in -- previously, you had mentioned that in more normal times, the $0.01 change had forced the $200 million impact to EBITDA. I -- so, I suppose that just directionally you can say whether it's the same or worse.

If you talk about all of our purchase in a year, that is directionally right in the sense it will be $2 million for the year. If you multiply the amount that you said and divide it by week multiplied by the number of weeks then multiply that $0.01 change, $2 million is directionally the right number.

But that's -- again, that relates to the cost side and not knowing what the prices of chicken are going to be 90 to 120 days forward. That's why that makes that a very difficult question to answer.

Our next question comes from Roanne Padker [ph] with KeyBanc Capital Markets.

This is Akshay Jagdale. My question, Bill, is regarding the timing of the supply discipline that you're talking about. The empirical evidence shows that 6 months after chicken companies start losing money, they start to cut back supply. Do you feel that this time around, perhaps, it'll be faster or slower than usual, given the unprecedented rise in grain prices? I mean, just in terms of the timing, can you help us there, how does it feel this time around?

Well, I believe, and the market has indicated this until mid-June, that most users of corn and soy believe that the new crop was going to be significantly cheaper as we realize the benefits of many more acres being planted. I think one could assume that realizing that, you would not have seen companies go very far out in their purchases. And so, with replacement cost of inventory changing so rapidly, I think that there's a great potential and great possibility for that cycle to shorten up significantly. And that's also supported by the fact that we've been well disciplined, I think, through the whole year. We did not ramp up our breeder supply flock as has been done in the past. And for all of those reasons, I believe that there is a strong potential for it not to take 6 months before we see a price response and a production cut response as a result. And I would remind you also, going into the period right after Labor Day and before the 1st of the year, it's typically, from a seasonal perspective, lower than normal pricing through the year. And so for that reason, if you're in the business of growing chickens and processing and selling chickens, and I think it's reasonable to assume that you would want to make sure that you didn't have a lot of extra product to sell in a traditionally weakening time of the year as far as market prices go.

That's helpful. And just on the demand side, so you've talked a lot about the promotional activity being there at Retail, but the pricing not getting to where you need to. You've also talked about adjusting your own supply and inventory levels to be more in line with where demand is today. So what's the bullish case now for boneless/skinless breast prices? I mean, what needs to happen? Because clearly, supply is down and all other part prices have really exceeded expectations year-to-date, but boneless/skinless breast prices really have not done as well as everyone had thought. So can you help us there, I mean, what needs to happen for the boneless/skinless breast market to get to levels that you'd be well expecting earlier in the year?

Further to your point, if you look back as recent as 2004, about 53% of the revenue share from the bird came from the breast meat. If you look at 2012, that's fallen to 36%. So we've seen a huge revenue shift from the front half of the bird to the back half of the bird and wings. So I think that's helpful. There's really 2 indicators that are going to determine what the price of breast meat is going to be. The first one is, restraint in the number of head that we place so that you can follow the number of egg set and chickens placed for that one. And then the second indicator is the average weight per head. The other good thing that the industry has done this year has been remaining constrained on that average weight. And with higher corn and soy prices, I believe that the industry will continue to not allow that weight to go up on a per head basis. So it's really those 2 indicators, the number of head and the average weight per head, that will be the major determinants in breast meat prices. I'll also remind you, and I said it just a few minutes ago, it's typical during this time of year that we see the average weight impacted by heat. And if that develops through the summer, then that's likely also to be a driver in breast meat pricing.

Our next question comes from Karen Eltrich of Goldman Sachs. [Operator Instructions]

Said I'm allowed to do a multipart question, which is my specialty. Just to be clear, to what percentage of corn do you have contracted in, at what level? And what percentage of chicken sales do you have into food service that is also contracted, so that we can get a sense in terms of future profitability?

We don't disclose the amount of corn and soy that we have either forward bought or have derivatives against. And the second part of your question is, our food service business is about half of our domestic business, so we split half Retail, half food service, domestically. And our domestic production represents about 90% of our total sales. And as we've been saying throughout this year, we do not employ pricing that involves fixed pricing for 12 months. And I'll remind you what we've said before is, we have pricing in food service done multiple ways, including some prices tied directly to cost, some prices tied to underlying commodity markets, some prices tied to chicken markets, and then some prices that are fixed, but for much shorter periods of time, for where we have the ability to go back in and change that pricing.

Okay. Can you maybe also give some commentary in terms of what you're seeing on a global nation in terms of supply-demand and how your JBS partnership is maybe accelerating some of these processes?

Good question. Our affiliation with JBS is absolutely helping us reach markets that would otherwise be much more difficult to reach. Using their network of sales offices and personnel and relationships helps us tremendously. And I think our success is in large part owed to that very fact and when you see our export numbers grow like they've grown the last 2 years. And that's why -- that's a key part of our strategy going forward. As I just mentioned, with that revenue and share shift around the bird, that owes to stronger demand for the back half of the bird in foreign markets. And we don't see any reason that, that's not going to continue. We've also continued to see demand growth for parts other than the back half. So as we sell more whole birds and even more breast meat and fully cooked items that had breast meat as a component, we're seeing that growth around the world. And that's why we have that as a major component in our strategy.

Our next question comes from Sarkis Sherbetchyan of B. Riley & Co.

So given your chicken contracts structure, would you be profitable with the grain and chicken prices at current spot levels?

At current spot levels, we would be close, yes.

So that's close to profitability, right?

Yes.

Okay. And so, also related to your contracts, my follow-up relates to, when you go back to your customers and reset your contracts, is it on a weekly basis, a monthly basis or is that just automatic with your negotiated band levels?

It's varied. We have in our portfolio, pieces of business that go from weekly to quarterly and a few more slightly beyond quarterly. Let me qualify on your -- the first part of your question though, you can't just look at 1 particular market component in terms of, is that bird profitable. You have to look at the mix. And so, mix impact has, in many respects, more impact than just pure price. So how we construct our portfolio has a lot to do with whether or not we're profitable.

Okay, that's helpful. And so, just to recap for Q3, did I hear correctly that you're hedged -- you hedged all your feed needs substantially below of market levels?

Yes, what we said was, we had forward bought corn and soy and used derivatives in such a way that substantially, our cost of goods sold was bought at better than current market prices.

Our next question comes from Michael Bailey of Par-Four Capital.

Most of my questions have been answered, but I wondered if you could talk a little bit about your ability to access the foreign markets for corn and soybeans?

Yes, right now, we are working on importing some Brazilian corn for the period starting as soon as next month going forward. Actually, we heard yesterday that corn has been contracted into the U.S. as far as July next year at very competitive levels coming from South America. So we are working on -- still on details on discharge capabilities of some ports that we have been working with. Right now, we are close to a deal on that, but we feel, as we said in our remarks earlier, we need some of the reports you have, the discharge capability, the data because they are export oriented ports and didn't have any imports coming to those places in the past. So they're working on that and we are confident in the next few days or next few weeks, we're going to be able to finalize some those deals.

Our next question is a follow-up from Reza Vahabzadeh of Barclays.

Yes, just to wrap up some prior questions and your answers. I mean, as higher grain costs eventually flow through your P&L, the 2 levers that you have to offset that is essentially your productivity improvements, including mix, as well as pricing power. And pricing power comes primarily to pulling back on production. Are there other levers that I'm missing?

I think you pretty much covered the bases there.

Right. And so, just again, going back on another question. As far as timing of pulling on these levers, obviously, productivity, you've been hitting on those, perhaps you can accelerate that lever. But as far as pulling back on production, how much lead time do you need to be able to make those kinds of production adjustments?

Well, it takes roughly 45 to 60 days in terms of the production cycle from egg set all the way through to slaughter and sale. So it can be done as soon as 45 days in some cases and 65 days in other cases, depending on the final weight of the birds that are processed.

Our next question is a follow-up from Ken Zaslow of Bank of Montréal.

Just a follow-up question. In terms of when we actually see the production cuts, do you expect to see -- what are, do you think, the process will be in terms of, you think, that the production will be accelerated to lighten the weights, then the cracking of the eggs and then the slaughter or the hatchery hen or how do you think of that this round will go? And on top of that, do you see utilization rates at levels that would let the industry make another substantial cut?

First part of your question, Ken, was -- I think given the time of year we're in, summer, that's typically when you have to think about if you want to maintain bird weight adding 1 day to 1.5 days to grow the weight rate to maintain that. So that's helpful from a timing perspective. And what was the second part of your question?

Well, the first part was really, do you -- which -- what part of the process do think it'll be, do you think it'll be accelerating the production, cracking the eggs or sorting the pullets? And then the next part of that is, do we have -- is the industry in the position of capacity utilization rates? I do understand your capacity utilization rates might be 75%, 80% right now, can it go down to 60% and still be viable? I guess that's the other part of the question.

I think so, for the period of time that we're going in, when demand is typically the lowest, between Labor Day and the 1st of the year. And given where we've been the last year, I believe it's entirely possible for the industry to make those kinds of cuts.

[Operator Instructions] And our next question comes from Brett Hundley of BB&T Capital Markets.

Bill, I just want to go back to the comment you made earlier about 180 million to 185 million egg sets possibly leading to pricing that would come in line with feed costs. And if you look at those types of numbers against were egg sets are now, it gives you maybe a 6% to 7% cut from current levels. So I guess, I've 2 questions surrounding that. Do grower contracts hinder any ability to reach those kind of cuts? And then secondly, how much do you think weight would contribute to such a cut?

Well, as I've said previously, I think the industry has been well disciplined in terms of the average weight per head, and I don't see that, that is going to change. I also believe that there's really nothing about the grower contracts per se that would inhibit the industry from making those kinds of cuts, and the cuts that I'm talking about in production are not largely different than what we realized last year. And so I don't see that things have changed to the extent that that's not possible again.

This will conclude our question-and-answer session. I would like to turn the conference back over to Bill Lovette for any closing remarks.

Well, thank you for participating today. We don't see room to rest during the second half of the year. And our challenge is to continue to deliver positive results in a changing marketplace. We look forward to the continued opportunities. And I'd like to thank our team members, our growers, our investors and the rest of our stakeholders for their continued support of Pilgrim's.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.