Source: MEATINGPLACE, 5/9/16
 
Benign production growth and stronger pricing for both breast meat and leg quarters point to a continued recovery in chicken margins, which have hit eight-month highs, analysts said.

Margins are benefiting from seasonal demand for breast meat, a likely pickup in leg quarter exports, slow breeding flock growth and declining feed costs as the South American crop comes to market, BMO Capital Markets analyst Kenneth Zaslow said.

While still down from a year ago, leg quarter prices rose for the sixth consecutive month in April. Georgia Dock whole bird prices stopped declining for the first time in 10 months.

Leg quarter prices are strengthening as grinders produce ground chicken for foodservice and retail sales, Zaslow said, noting March leg quarter inventories hit four-year lows.

Mexico, the largest export market, has removed export bans from all states except Indiana. “Once export volumes improve to Mexico, other countries likely will follow suit, reflecting improved confidence in U.S. product,” Zaslow predicted.

On the supply side, the hatchery breeding flock was flat year over year, marking the slowest growth in three years, Zaslow said.
Analysts for the Daily Livestock Report said while chicken prices strengthening, processors who had hoped for a bigger rebound now seem to be scaling back broiler supply plans for the second half of the year. Egg sets in the last week of April were 1 percent below year-ago levels, they noted.

“If this trend continues, the supply reduction moving into the rest of the year could  provide some price support at the wholesale level,” the analysts wrote in the report, published by Steve Meyer and Len Steiner Inc.

For more stories, go to www.meatingplace.com.