Phenomenal demand pushed chicken prices to extraordinary levels, lifting profit margins to rarely observed heights.
Thanks to rising prices, the chicken industry is recovering quickly from the COVID-19 pandemic.
Conditions at the outset of the COVID-19 pandemic destabilized the global economy. Integrators faced challenges on multiple fronts. Restaurants closed or reduced service. The marketing balance between foodservice and retail was completely upended. The shift in demand on short notice caused prices of key items to drop.
Additionally, the spreading illness and widespread absenteeism among plant workers caused integrators to incur higher costs. Plants were implementing new safety protocols and raising wages to boost staffing levels.
For a brief stretch, the margin situation for industry stakeholders was dire.
Integrators were left with little choice but to reduce output. A painful course change after large capacities of additional processing came online in 2018 and 2019.
According to U.S. Department of Agriculture (USDA) estimates, ready-to-cook broiler production in the U.S. totaled 44.2 billion pounds between April 2020 and March 2021. That represents a 1.2% decline from the 12-month period immediately prior. This didn’t radically alter the supply landscape for broiler meat, but was enough of an adjustment to shift leverage back to the integrator.
Changes were also taking place downstream in the value chain. At-home food consumption surged benefitting retail supermarkets. Foodservice players found new and innovative ways to get chicken to consumers despite the pandemic restrictions.
Additionally, a marketing blitz by leaders in quick serve brought several new chicken-based products to market. Consumers soon had several new options for chicken and responded favorably to most, if not all, of them.
Prices explode and margins follow
With demand for chicken products surging on multiple fronts, wholesale broiler prices exploded.
According to the USDA’s Agricultural Marketing Service, spot prices for boneless skinless breast meat topped $2 per pound (Northeast) in May 2021 for the first time since July 2014. Whole wing prices averaged more than $3 per pound during that same month, setting a new record for this product.
Even though input costs rose, product values still sent industry margins soaring. According to LEAP Market Analytics’ costs-and-returns model, the broiler industry enjoyed average net returns of $0.35 per pound (on a ready-to-cook basis) in May 2021.
The last time net returns were greater than $0.30 per pound was June 2004. That threshold has been cleared only a handful of times in history.
Challenges remain for integrators as they navigate higher input costs, as well as the uncertainty of what post-pandemic life might look like for their business. But it’s clear the industry is emerging from the pandemic in much better shape than the beginning.
Par Mark Jordan (01/07/2021)
Source : wattagnet.com
Photo : Morrisons Farming (tirée de l'article original)