Source: Susan Kelly, MEATINGPLACE, 1/5/18


Jefferies stock analyst Akshay Jagdale is forecasting a 4 percent increase in U.S. chicken production in 2018, double USDA’s 2 percent estimate, driven by growth in the breeder flock.

“If our view on oversupply plays out, we believe industry pricing could be down 3-10 percent in 2018,” Jagdale wrote in a report to clients titled “Too Many Chickens in 2018.”

Jagdale said the investment banking firm’s chicken pricing model points to a 5 percent decrease in industry revenue per pound in 2018, compared to a 7 percent increase in 2017. The proprietary model incorporates quarterly price projections for leg quarters, boneless skinless breasts, wings, tenders and whole birds.

Some in the industry expect breeder flock growth to decline to zero by May, from 5 percent currently, driven by an increase in mature hen slaughter, Jagdale noted. “They contend that the age of the flock is too high and the industry will adjust the average age lower by slaughtering a higher percentage of mature hen over the next six months,” he said.

Jagdale disagrees with that assessment, believing instead that the average age of the flock has already been adjusted downward and that pullet placement growth is accelerating.

The analyst reduced his fiscal 2018 earnings estimates for Sanderson Farms and Pilgrim’s Pride. He maintained ratings of “underperform” on Sanderson shares and “hold” on Pilgrim’s Pride.

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