Source: MEATINGPLACE, 9/30/13

Despite concerns about the timing and magnitude of supply increases and their potential impact on price, 2013 is shaping up to yield record profits for the poultry industry, a Wall Street analyst said.

While production is likely to increase meaningfully in the fourth quarter of this year and throughout 2014, lower feed costs will keep profits strong into 2014, BB&T Capital Markets analyst Heather Jones said in a note to clients.

The industry is ramping up pullet placements at a pace well in excess of historical patterns as the breeding stock is replenished, which is a risk to profitability, Jones noted. Production over the past four weeks is about 2.5 percent above last year, even with a constrained breeder flock, she said.

The growing supply has triggered a 20 percent decline in boneless skinless chicken prices since mid-August.

Yet “the industry could put up some very attractive margins next year despite higher supplies,” Jones concluded. “If feed costs plunge further, as some expect, and/or protein demand shifts further toward chicken, even those margins could prove conservative.”

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