Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 4/26/11

The chicken industry needs to cut production by 1 percent to 2 percent to return to profitability and cut by 2 percent to 3 percent to return to normalized levels of profit, a Wall Street analyst predicted.

In a research report on Pilgrim’s Pride, BB&T Capital Markets analyst Heather Jones painted a grim picture of the chicken industry in general, predicting continued high feed prices and sluggish demand and noting the industry has been slow to respond to a market in which producers are already losing money.

“At present, we estimate the average producer exposed to spot feed costs is barely breakeven at best and more likely generating losses in the low single-digit range on a per pound basis,” Jones wrote, predicting losses will widen considerably once seasonal price strength abates. Chicken pricing typically experience an uptick in the spring and early summer.

While predicting retail demand for chicken should improve as beef and pork prices skyrocket, she noted, “the effect has not been as pronounced as we would have anticiapted as retailers seem to have 'eaten’ some of the increase in beef/pork wholesale prices, while not completely passing on lower wholesale chicken prices in a bid to offset lower margins in beef and pork.”

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