MILWAUKEE—Pilgrim’s Pride Corp., the nation’s largest chicken producer, said Tuesday that it lost $52.8 million in its third quarter because of record-high grain costs that have made animal feed far more expensive and prices charged to consumers aren’t rising fast enough because of an oversupply.

But its shares surged because the loss was smaller than expected.

The Pittsburg, Texas-based company’s loss amounted to 75 cents per share compared with a profit of $62.6 million, or 94 cents per share a year earlier. Excluding discontinued operations, the company says it lost 69 cents per share.

Revenue rose 5 percent to $2.21 billion from $2.10 billion in the quarter.

Thomson Financial said analysts expected a loss of $1.19 per share on revenue of $2.14 billion.

Shares climbed rose 34 cents, or 2.3 percent, to $12.51 Tuesday, after trading as high as $14.72 earlier in the session. A day earlier, Pilgrim’s Pride shares lost 9.5 percent after rival meat producer Tyson Foods Inc. saw its quarterly profit plunge 90 percent. Tyson, like Pilgrim’s Pride, also attributed its loss to the record-high prices for grain.

Grains like soybeans and corn, which have skyrocketed in price over the past year, are a key ingredient in animal feed. And the company says prices charged to consumers aren’t rising fast enough because there’s too much chicken on the market to sustain higher prices. The company has been making production cutbacks, but says prices are still too low.

“Simply put, there’s still too much breast meat available to drive market pricing significantly higher,” Clint Rivers, president and chief executive officer, said in a conference call.

Pilgrim’s Pride said its total feed-ingredient costs in the quarter rose 41 percent, or $266 million, compared to the year-ago period. It estimates its total feed-ingredient costs for the year will be $900 million more than last year.

As input costs rise, the retail price for boneless chicken has fallen because of an oversupply. Market breast prices now average about $1.33 per pound, Rivers said. Market prices should be at least $2.15 for the industry to break even, he said, and the company would like to see chicken sell for a dime more a pound to turn a profit.

To force chicken prices higher, Pilgrim’s Pride will have cut 5 percent of its production by the end of this year. Total pounds were down 1.33 percent in the third quarter, and they’re expected to be down 8.7 percent in the fourth quarter.

Pilgrim’s Pride’s competitors are making similar cuts.

Consumers should brace to see higher chicken prices as companies make these changes, Rivers said, though he didn’t say how high prices could go.

“American consumers should brace themselves for sticker shock in the meat case over the next 12 months,” he said.

Rivers said given all the cost pressures, the company expects an operating loss in the fourth quarter. The company has already said it may take until the summer of 2009 to be profitable again.

Pilgrim’s Pride has also been trying to shed its costs to further boost its bottom line.

Earlier this month, the company said it would cut 600 jobs at a plant in El Dorado, Ark., in response to the record-high prices for feed.

Rivers said the company has already eliminated about 1,100 positions so far this year, not including the upcoming cuts in Arkansas. Pilgrim’s Pride also sold 7.5 million shares of its common stock for $177 million to underwriter Lehman Brothers Inc., to give the company more money.

The company has been cutting costs, but higher pricing is critical to offset the rising input cost pressure, Deutsche Bank analyst Eric Katzman wrote in a research note. He said the company’s pricing has been insufficient so far this year, but current trends —including the revenue-driven sales increase—show it’s making progress.