Ben Bienvenu: Okay, very good. Thinking about the US business, strong results in the fourth quarter. We’ve seen commodity fundamentals improve into the early part of 2024. It looks as though that should persist as we move through 2024. How should we be thinking about sequencing of profitability this year? And did you all have any weather disruptions or operational hiccups associated with the weather that we saw in in January or early February in the first quarter that we should be mindful of?
Fabio Sandri: Yes, thank you. As we look at our US business, as I mentioned, we have a very well-diversified portfolio. We are able to capture upsides in the commodity market and protect the downsides with the more stable small bird, tray-pack, and the Prepared Foods business As looking to the drivers in terms of supply and demand, I think we are seeing some tailwinds in terms of cost, especially on the grain. As I mentioned, there is some record production in US and in South America, which will provide us close to $188 million in cost reduction during the 2024 year. Of course, not all of that will go into the bottom line, as we have a lot of our pricing based on market or based on cost plus initiatives. But if you look at the supply, we’re expecting muted supply growth during the Q1, and we’re seeing some very strong demand for chicken.
As we mentioned, I think chicken is a great value for the consumers. The spread between chicken and beef and pork are close to record levels, and we’re seeing a strong increase in the promotional activity by the retailers. If you look at what’s happening in retail right now, we’re seeing the shoppers doing more trips and buying less every trip that they do, and that, it’s really important for the retailer to drive traffic, and chicken is a great way to drive traffic for the stores. So, we’re seeing the increase in promotional activity and an increase in the demand, especially from our key customers on that segment. On the food service, we’re seeing some lower traffic and the consumer is spending a little bit more at home, but what we are seeing is that an increase in penetration of the chicken offerings.
So, we’re seeing strong demand both in food service and the retail starting of the year. Now, as the year progresses, we are expecting, or USDA is expecting a little bit of an increase close to 1% in terms of supply for Q2 and Q3, which is in line with the expected seasonality or the grilling season. And then a slight growth in Q4 of 0.8% for a total of 0.8%. As I mentioned as well, the net availability of protein for the west is expected to be really muted, and with the reduction of the beef prices. So, everything on the drivers are in line for a strong year for chicken in 2024.
Matt Galvanoni: And Ben, to your question on disruptions so far in Q1, we’ve had relatively minor disruptions from the weather relative to the storms earlier in the quarter. So, nothing that was very impactful overall.
Ben Bienvenu: Okay, great. Thanks for taking my questions.
Operator: Our next question comes from Andrew Strelzik from BMO. Please go ahead with your question.
Andrew Strelzik: Hey, good morning. Thanks for taking the question. I wanted to just follow up on the prior question about the US margin outlook. And if I think about your five-year average margin in the US is just north of 6% operating margin. And you said in the fourth quarter the cutout was in line with the five-year average. Obviously, fee costs are heading well below the five-year average. You’re constructive on the demand backdrop. So, it seems to imply that 2024 US margins could be solidly above that kind of five-year average just north of 6% as well. Am I thinking about that correctly? Is there anything that I’m kind of missing within that picture?
Fabio Sandri: No. Great. Andrew, I think it goes back to the portfolio as I mentioned before. We have a well-balanced portfolio. I think the commodity pricing and the growing cost impacts only partially our portfolio as we demonstrated over 2021, 2022 and 2023. The tray-pack and the Small Bird business are more cost-driven or margin-driven. And we have a great partnership, and we continue to grow on those business to offset the volatility of the Big Bird. So, some of the benefits of the lower grain costs will go through our bottom line, especially again on the commodity segments, but on all other segments we expect more stable margins.
Andrew Strelzik: Okay. All right.
Fabio Sandri: Yes, to fair with the last year or normal years, as we always mentioned, we want to be the best operator. We want to capture the upsides and protect the downsides. And what we can say is that we will always perform above the competition, whatever the market will allow us to capture.
Andrew Strelzik: Yep, that makes good sense. And my second question is on hatchability, and if I look at the slide and the data that that you provided on that slide, hatchability has basically gone straight down this year. Some of that I guess is probably seasonal, but we’re now outside most recently the five-year average. Can you just maybe talk about a little bit what’s going on from a hatchability perspective? I think if I rewind, we were supposed to see increases in that kind of steadily and hasn’t really materialized. And so, how are you thinking about hatchability going forward for the industry and the limitations that creates on production growth for chicken in 2024?
Fabio Sandri: Yes, sure, Andrew. That has been a topic that we’ve been discussing over the last two to three years, right? I think the hatchability issue has started, as we mentioned, as we changed – as the primary breeding companies changed their breeds to improve the quality and the yields on the breast meat. We started several years ago with the issue of the woody breast and the reaction from the primary breeders was to change their breed to improve the quality and reduce that issue, and that impacted the hatchability. That, as well as a breed that performs better on the conversion, creates a little bit of a challenge on the live side, on the egg production, and on the hatch. And I think that’s what we saw, right, from 82% to close to 79% to 80% level, the impact of that change in the breed to our industry.
