Source: MEATINGPLACE, 6/5/15

Wall street analysts say the outlook for chicken companies will stay strong through 2016 amid continued robust demand and constrained supplies.

U.S. chicken companies uniformly indicated capacity constraints and a ceiling to weight increases likely will limit production in 2016, BMO Capital Markets analyst Kenneth Zaslow said in a note to clients following a recent investor conference.

Despite the 7 percent increase in pullet placements, industry speakers consistently indicated that about 3 percent of the pullets will be used for domestic expansion while 3 percent will be exported to Mexico for hatching eggs, Zaslow noted. The remaining 1 percent will be used to reduce the breeding flock age.

Weight gains likely will be due to a dramatic shift into more big bird production, which increased 18 percent through mid-May in 2015, while small bird production fell 5 percent, Zaslow said.

Among large processors, Pilgrim’s Pride may deploy its cash for an acquisition, while Tyson Foods is realizing faster-than-expected cost savings from its Hillshire acquisition, Zaslow said.

Tyson and Pilgrim’s may be able to capture higher chicken margins than Sanderson Farms, which faces ongoing pricing pressure on leg quarters, Zaslow said.

Tight beef supplies, solid economic conditions and lower fuel costs all will support demand for chicken, Stephens analyst Farha Aslam said in a report after her firm’s spring investor conference.

Leg quarter pricing has been hurt by trade bans in the wake of the highly pathogenic avian influenza outbreak, she noted.

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