Record-High Chicken Prices in the U.S.
Chicken prices in U.S. supermarkets have reached all-time highs. The spike is expected to remain as major companies like Tyson Foods decrease poultry production to increase profit margins. Shoppers grappling with inflation are opting for chicken over pricier proteins like beef and pork.
Impact on Top Producers
While companies such as Tyson and Pilgrim’s Pride will likely see a boost in their earnings from these rising chicken prices, consumers will feel the pinch. The profitability margin for chicken producers is currently at its highest in the past year.
Tyson Foods’ Strategy
Arkansas-based Tyson Foods, a seller of all three meats, experienced a chicken surplus after reaping large profits during the price surge in the COVID-19 pandemic. To cut down on costs, the company has closed six U.S. chicken plants this year, impacting nearly 4,700 workers. After two quarters of operational losses, analysts predict that the company’s chicken segment may have become profitable again in the quarter ending on September 30.
Decreasing Supplies
U.S. facilities have placed approximately 2.8% fewer chicken eggs in incubators in the six weeks ending on September 23 compared to the previous year. This is in stark contrast to the same timeframe in 2022 when 3.6% more eggs were set in incubators. The trend of reducing placements started after chicken supplies boomed the previous year.
Chicken Market Dynamics
According to Bob Brown, an independent livestock market analyst, the reduced placements have supported the chicken market. A profitability index for poultry producers, which takes into account chicken and feed prices, touched its highest point in over a year in September. With corn prices at a three-year low, reduced feed costs are benefiting producers.
Efforts to Limit Production
Chicken businesses have taken steps to curtail bird weights during the summer to decrease production and restore profitability. Consequently, consumers get less meat from lighter birds.
Wholesale Prices and Future Expectations
The government’s prediction for chicken production in 2023 has been slightly reduced from the previous month, although production for 2023 is still expected to exceed 2022 levels.
Growing Demand for Chicken
Bird-flu largely spared meat-producing chickens in 2022, ensuring plentiful supplies. This was while the worst bird-flu outbreak in U.S. history decimated the egg-laying hen population. The increased U.S. demand is now helping diminish these excess supplies.
Outlook for Tyson and the Chicken Industry
Tyson’s chicken segment is forecasted to show positive margins soon, and the company’s quarterly results are anticipated in November. However, an excessive supply remains a concern. Tyson has mentioned expanding layoffs at a North Carolina facility due to customer demand, hinting at continuing challenges. Rising chicken prices might hamper demand, but the ongoing beef shortage means consumers will likely continue to prefer chicken.
Conclusion
With beef prices remaining high, the demand for chicken is predicted to increase in the foreseeable future, according to Bill Densmore, senior director for Fitch Ratings.
