Source: Rita Jane Gabbett, MEATINGPLACE, 10/31/14

An upbeat panel of industry leaders at the National Chicken Council annual conference here predicted demand will grow for chicken products, particularly abroad, as the U.S. industry continues to increase production in both bird numbers and weights.
In the hallways between sessions, however, executives acknowledged the good times would likely come to an end sometime in the next year or two, as production increases would inevitably push prices down to unprofitable levels.

“We’ll eventually crash because we are greedy and we’ll just keep making more,” one executive quipped, in a reference to the supply/demand cycle that affects most commodity food products.

The executive panel pointed out that the “normal” three-year poultry cycle of one good year, one fair year, then one bad year, has been upended over the past decade by “events” — be they political, climatic or government-policy induced. 

“I don’t think [the chicken cycle] exists the way it did in the 1970s and 80s,” said Lampkin Butts, president and CEO, Sanderson Farms, citing a decade of drivers from the Russian ruble collapse in 2002 to avian influenza in Europe and China in 2006, the U.S. economic collapse in 2008, and combination of drought and ethanol policy that catapulted corn prices to $8 per bushel in 2012.

While predicting a 2 percent to 3 percent increase in chicken production in the coming year, based both on more birds and heavier birds, Butts warned that this year’s strong demand gains are unusual due to escalated pork and beef prices due to reduced supplies.

“We don’t get that every year,” he said, noting that absent those factors, demand increases are limited to more in line with population increases, which in the United States is about 1 percent to 1.5 percent per year.

Michael Welch, president and CEO of Harrison Poultry, told the group his industry optimism is based on exports. “Africa and India are the continents of the future. They will be the Russia and China of the future,” he said. “I feel as strong about exports as I ever have.”

Big, bigger, even bigger
The panelists agreed that bird size increases continue.

Butts said over the past year average big bird weights have averaged 8.2 to 8.6 pounds, with nearly a dozen companies producing birds over 9 pounds. He predicted more companies moving to the 8.5-pound to 9-pound range in the short term.
Welch noted that early this year, for the first time in history, one U.S. chicken plant averaged over 10 pounds per bird for an entire month. He said the industry is yet to discover the limits of genetic potential for bird size increases.

Randy Day, executive vice president of supply chain, Perdue Farms, said in addition to heavier birds and the two new plants within the industry currently under construction, he expects to see more companies adding production lines to existing plants.
Butts agreed, adding that as breeder problems over the past year have subsided, plants will now be looking to ramp up to 100 percent capacity.

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