Source:  MEATINGPLACE.COM, 4/19/10

Growing demand, restrained production, healthy prices and well-behaved feed costs are setting the stage for a substantial rebound in chicken margins, analysts who attended a recent industry conference said.

The analysts, who attended the Express Markets Broiler Outlook Conference in Atlanta, painted a rosy picture of chicken industry fundamentals heading into the summer grilling season.

"The conference confirmed our view that chicken cutout margins have begun a dramatic seasonal recovery," BMO Capital Markets analyst Kenneth Zaslow said in a research report.

Noted BB&T Capital Markets Heather Jones, "The outlook was considerably more positive than would have been expected two to three months ago on the part of presenters and attendees."

Although EMI is projecting a 2 percent rise in broiler production over the next two years, Zaslow said, chicken production should stay below 2008 levels until at least mid- to late 2011 due to a contracting hatchery supply flock.

EMI predicted boneless, skinless breast prices could hit $1.70 to $1.80 per pound this summer due to tight supplies, but the outlook for leg prices is uncertain because of the unresolved trade dispute with Russia, he said. Limited domestic leg supplies should motivate Russia to resolve the dispute, he noted.

Feed prices

Chicken margins should get a further boost from expected declines in corn and soybean meal prices due to projections for a record 2010-2011 U.S. corn crop, record South American soybean production and record U.S. soybean acreage, Zaslow said.

Jones said in her view, unseasonably strong pricing through Easter was driven by improving demand for poultry that will continue to strengthen later this year.

"Recent broad-based commentary from other food companies, restaurant operators, presenters at the EMI conference as well as other poultry industry contacts all suggest that foodservice has in fact begun to improve, albeit modestly," she wrote in a note to clients.

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