Source: MEATINGPLACE, 1/14/14

The recent expansion in chicken supply is poised to slow, bolstering prices and cutout margins, says BMO Capital Markets analyst Kenneth Zaslow.

Broiler production increased 3 percent in December from a year ago due to higher slaughter and bird weights. Although production should continue to increase for the foreseeable future, supply expansion likely will slow from fourth-quarter levels, Zaslow said in a note to clients.

“The industry can only extend the productivity of birds for so long,” said the analyst. He predicted the smaller breeding flock will slow production growth to 2 to 3 percent in the first half of 2014.

Chicks placed rose a modest 1 percent in December, slowing from the 2 to 4 percent pace of the past several months.

“The increase in chicks placed should remain somewhat limited as lower hatchability continues to mitigate the increase in egg sets,” Zaslow said.

Chicken margins softened in December but likely reached a bottom, he added. Lower feed costs and improving chicken prices should fuel margins above historical averages going forward, Zaslow wrote.

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