Market Report: Chicken

Chicken production in 2010 was up 3 percent over 2009, and the USDA predicts about a 2 percent increase for 2011, reports Bill Roenigk of the National Chicken Council. While ample chicken stocks are keeping a lid on prices through the first half of 2011, especially for breast meat, there are indications that summer will see an upswing. “The very high cost of feed—especially corn—and the increased demand for feed crops both domestically and globally will push up prices,” he forecasts. Weather and other factors put a damper on 2010’s feed crop yields and the projected inventory is low. “We have to hope for better crops when farmers start planting corn and soybeans this spring,” he adds.

According to Bill Lapp of Advanced Economic Solutions, seasonality also impacts chicken prices. “Seasonally, the market typically peaks sometime between May and August. Today’s poor chicken producer margins suggest some scaling back in 2011 production plans. By the summer of 2011, the combination of rising seasonal demand and reduced broiler supplies would imply the potential for boneless skinless chicken breast prices to approach $2.”

What’s more, the prices of chicken parts don’t all move in the same direction at the same time, says David Harvey, agricultural economist with the USDA’s Economic Research Service. “Wings are higher in the winter, especially around the holidays and through to the Super Bowl,” he explains. “The export market is oriented to dark meat, which means that legs may increase in price while breast meat is lower in cost.” Right now, exports are on the weak side.

The fact that the American economy is still in disarray is a factor, too. “In 2009, we saw a 5 percent falloff in demand at foodservice, especially in casual and fine dining,” says Roenigk. “Consumers bought more chicken in the supermarket instead of eating it away from home.” He expects 2010 numbers to be similar, but if 2011 sees enough improvement in the economy to put people back to work, foodservice demand for chicken should go up.

Plus, adds Lapp: “The overall protein situation has become much “tighter” over the past three years — about a 7 percent decline in per capita supplies of all meat. With higher feed costs and further improvement in the U.S. economy, we should be prepared for higher prices.”