Source: MEATINGPLACE, 9/11/14

The chicken cutout margin declined for the first time in six months during August, falling from decade-high peaks on weaker breast and leg prices, but margins should hold above historical averages for the foreseeable future, one Wall Street analyst is projecting.

Leg prices could drop further following the Russian ban on U.S. legs, while higher soybean meal costs will also help offset higher wing prices and lower corn costs, said BMO Capital Markets analyst Kenneth B. Zaslow. The sanctions likely will pressure prices by 5 to 7 cents until other nations absorb Russia’s export demand.

Retail demand for leg quarters has not increased much despite dark meat’s relative cheapness to white meat and competing protein sources, Zaslow wrote in a note to clients.

Boneless skinless breast prices are likely to decline into the fall, reflecting retailers holding ample supplies to meet demand through the end of summer, Zaslow said.

Support for margins will come from limited production growth and strong demand,he added. He noted that Georgia Dock whole bird prices remained at record levels thanks to ongoing demand amid tight competing meat supplies and limited supply of small birds.

Quick-service restaurant promotions continue to support whole birds, Zaslow said.

U.S. chicken production increased more than 2 percent in August from last year as higher weights offset moderately lower slaughter, he said. This reflects ongoing hatchery supply flock limitations and the recent discovery of a rooster genetic defect, he added.

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