Source: MEATINGPLACE, 6/9/14
 
Signs are starting to point to a peak in the chicken profit cycle in 2014, two Wall Street analysts said Friday.
Chicken cutout margins may be nearing a peak due to the eventual end of a series of unique supportive factors, including challenges with the breeding stock and the impact on pork prices from the PEDv outbreak, said BMO Capital Markets analyst Kenneth Zaslow.

Chicken companies should generate superior returns in 2014 and through the middle of 2015 due to production constraints from tight breeder egg supplies, lower hatchability in an older flock and a delay in increasing the flock, he said.

But companies including Sanderson Farms, Peco Foods and Claxton Poultry that attended a recent BMO investor conference indicated that profitability would moderate in 2015, Zaslow wrote in a research report.
The impact of the porcine epidemic diarrhea virus (PEDv) will subside and the breeding flock is likely to increase next year, he said. Sanderson and Peco are building new plants over the next two years, while Allen Harim is looking to convert a pickle plant into a chicken plant.

The height of the impact of the PEDv outbreak on pork supplies likely will be in late summer, Zaslow said.
BB&T Capital Markets analyst Brett Hundley also said the chicken cycle is likely peaking in a note to clients Friday. He downgraded shares of Tyson Foods due to the impact of a potential Hillshire Brands acquisition at a time when chicken conditions are peaking.  

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