Poultry prices soar as US producers cut production
US consumption of chicken is expected to exceed 45kg per person in 2023 for the first time in the country’s history
05 October 2023 - 13:31
byTom Polansek
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Chicago — Chicken prices at US grocery stores have hit record highs and should stay elevated as Tyson Foods and other companies dial back poultry production to boost margins while inflation-weary shoppers buy chicken instead of beef and pork.
Higher chicken prices should improve earnings at top producers Tyson and Pilgrim's Pride, but will pinch consumers' pockets as they try to save money by turning away from higher-end proteins. One index shows chicken producer profit margins at their highest in a year.
US consumption of chicken is expected to exceed 45kg per person in 2023 for the first time ever, data from the US department of agriculture shows.
Beef consumption is forecast to drop to its lowest since 2018, as prices climb due to dwindling cattle supplies. Meanwhile, consumer spending cuts have knocked pork consumption to the lowest since 2015.
Tyson, which sells all three types of meat, had to deal with a glut of chicken after earning huge profits when meat prices soared during the Covid-19 pandemic.
The company announced the closures of six US chicken plants with nearly 4,700 employees this year to reduce costs. Its chicken business likely returned to profitability in the quarter ended September 30 after two quarters of operating losses, analysts said.
Tightening supplies now favour producers’ bottom lines.
US facilities that hatch chicken eggs placed about 2.8% fewer eggs in incubators in the six weeks ending on September 23, compared to a year earlier, according to US government data. That was a sharp turnaround from the same period in 2022, when hatcheries set 3.6% more eggs in incubators.
Chicken producers placed about 2.7% fewer chicks for meat production over the six weeks through September 23 from a year earlier, when there was a 4.5% increase. Cumulative placements for 2023 dropped below 2022’s figure at the end of May, US data shows.
“They cut back,” said Bob Brown, an independent livestock market analyst. “That seems to have buoyed the chicken market.”
An index of chicken prices and feed prices that reflects profitability for poultry producers in September hit its highest level in more than a year, said Brown, who maintains the index. Declining feed costs help producers improve margins, and maize prices are near the lowest in three years.
Chicken companies sought to constrain the weights of birds this northern hemisphere summer as part of “efforts to limit production and restore profitability,” Rabobank said. Lighter birds produce less meat for consumers.
In August, retail prices for whole fresh chickens and bone-in legs reached nominal records, the latest monthly US Department of Agriculture data show. Drumstick prices climbed 10% from a nearly one-year low reached in February. Wholesale prices have also rebounded.
In September, the US government trimmed its estimate for 2023 chicken production from August due in part to expectations for lower chick placements. Production is still expected to surpass 2022.
Producers moved to reduce placements after chicken supplies swelled in 2022.
Tyson CEO Donnie King said in February that executives overestimated how strong consumer demand would be for chicken in late 2022, leaving the company to resell excess inventories at a discount.
“That was a failure on their part,” said Arun Sundaram, senior equity analyst at CFRA Research.
Growing demand for chicken
Chickens raised for meat largely avoided bird-flu infections in 2022, keeping supplies ample as the worst-ever US outbreak devastated flocks of egg-laying hens and triggered export restrictions on poultry.
Improving US demand is now helping reduce excess supplies, Sundaram said. He forecasts Tyson's chicken business will report positive margins of 1.5% in the quarter ended September 30 before jumping to 4% in financial year 2024. Quarterly results are expected in November.
“We’ve seen some recovery in chicken prices and we've seen some consumer prices start to level off,” Tyson CFO John Tyson told investors in September. “We probably would have expected that to take place sooner.”
Companies still have large supplies in freezers. US inventories of frozen chicken breasts were a record high for August. Tyson also said this week that layoffs will expand to the second shift at a chicken facility in North Carolina, “in response to customer demand,” signalling ongoing hurdles.
Further increases in chicken prices could threaten demand, said Adam Speck, senior commodity analyst for Gro Intelligence.
But consumers are still choosing chicken due to tighter beef supplies, after ranchers reduced their herds during three years of drought in the Great Plains.
“We should see improving demand for chicken going forward,” said Bill Densmore, senior director for Fitch Ratings. “We'll see retail beef prices remain high.”
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Poultry prices soar as US producers cut production
US consumption of chicken is expected to exceed 45kg per person in 2023 for the first time in the country’s history
Chicago — Chicken prices at US grocery stores have hit record highs and should stay elevated as Tyson Foods and other companies dial back poultry production to boost margins while inflation-weary shoppers buy chicken instead of beef and pork.
Higher chicken prices should improve earnings at top producers Tyson and Pilgrim's Pride, but will pinch consumers' pockets as they try to save money by turning away from higher-end proteins. One index shows chicken producer profit margins at their highest in a year.
US consumption of chicken is expected to exceed 45kg per person in 2023 for the first time ever, data from the US department of agriculture shows.
Beef consumption is forecast to drop to its lowest since 2018, as prices climb due to dwindling cattle supplies. Meanwhile, consumer spending cuts have knocked pork consumption to the lowest since 2015.
Tyson, which sells all three types of meat, had to deal with a glut of chicken after earning huge profits when meat prices soared during the Covid-19 pandemic.
The company announced the closures of six US chicken plants with nearly 4,700 employees this year to reduce costs. Its chicken business likely returned to profitability in the quarter ended September 30 after two quarters of operating losses, analysts said.
Tightening supplies now favour producers’ bottom lines.
US facilities that hatch chicken eggs placed about 2.8% fewer eggs in incubators in the six weeks ending on September 23, compared to a year earlier, according to US government data. That was a sharp turnaround from the same period in 2022, when hatcheries set 3.6% more eggs in incubators.
Chicken producers placed about 2.7% fewer chicks for meat production over the six weeks through September 23 from a year earlier, when there was a 4.5% increase. Cumulative placements for 2023 dropped below 2022’s figure at the end of May, US data shows.
“They cut back,” said Bob Brown, an independent livestock market analyst. “That seems to have buoyed the chicken market.”
An index of chicken prices and feed prices that reflects profitability for poultry producers in September hit its highest level in more than a year, said Brown, who maintains the index. Declining feed costs help producers improve margins, and maize prices are near the lowest in three years.
Chicken companies sought to constrain the weights of birds this northern hemisphere summer as part of “efforts to limit production and restore profitability,” Rabobank said. Lighter birds produce less meat for consumers.
In August, retail prices for whole fresh chickens and bone-in legs reached nominal records, the latest monthly US Department of Agriculture data show. Drumstick prices climbed 10% from a nearly one-year low reached in February. Wholesale prices have also rebounded.
In September, the US government trimmed its estimate for 2023 chicken production from August due in part to expectations for lower chick placements. Production is still expected to surpass 2022.
Producers moved to reduce placements after chicken supplies swelled in 2022.
Tyson CEO Donnie King said in February that executives overestimated how strong consumer demand would be for chicken in late 2022, leaving the company to resell excess inventories at a discount.
“That was a failure on their part,” said Arun Sundaram, senior equity analyst at CFRA Research.
Growing demand for chicken
Chickens raised for meat largely avoided bird-flu infections in 2022, keeping supplies ample as the worst-ever US outbreak devastated flocks of egg-laying hens and triggered export restrictions on poultry.
Improving US demand is now helping reduce excess supplies, Sundaram said. He forecasts Tyson's chicken business will report positive margins of 1.5% in the quarter ended September 30 before jumping to 4% in financial year 2024. Quarterly results are expected in November.
“We’ve seen some recovery in chicken prices and we've seen some consumer prices start to level off,” Tyson CFO John Tyson told investors in September. “We probably would have expected that to take place sooner.”
Companies still have large supplies in freezers. US inventories of frozen chicken breasts were a record high for August. Tyson also said this week that layoffs will expand to the second shift at a chicken facility in North Carolina, “in response to customer demand,” signalling ongoing hurdles.
Further increases in chicken prices could threaten demand, said Adam Speck, senior commodity analyst for Gro Intelligence.
But consumers are still choosing chicken due to tighter beef supplies, after ranchers reduced their herds during three years of drought in the Great Plains.
“We should see improving demand for chicken going forward,” said Bill Densmore, senior director for Fitch Ratings. “We'll see retail beef prices remain high.”
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Patel calls for urgent probe into temporary tax rebate on chicken imports
Supermarkets start rationing eggs amid avian flu outbreak
Q&A with Daybreak transitional officer on bird flu and chicken prices
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.