TheMeatSite.com - TheMeatSite.com - news, features and articles for the meat processing industry

News

Why Are Chicken Prices in the US Really Breaking Records?

18 July 2014

ANALYSIS - US consumers are facing record chicken prices. While a recent report suggested this was due to poor fertility in one company's male broiler line, that seems to be an over-simplification, writes Jackie Linden.

The root of the situation goes back to 2011, when feed prices were at their peak and the US economy was in the doldrums, say industry analysts.

Last week, NBC reported that the world's largest chicken breeder has discovered that a key broiler male was demonstrating reduced fertility, and the publication made a link with rising prices for poultry meat as beef and pork too hit record high prices.

Marla Robinson, described as spokesperson for Aviagen, told NBC spoke the the breed, Aviagen Group's standard Ross male, is sire through its offspring to as much as 25 per cent of the nation's chickens raised for slaughter and that Aviagen had systematically ruled out other possible causes for a decline in fertility before determining a genetic issue was at the root of the problem.

The issue is hitting an industry that is already suffering from a short supply of breeder birds. NBC reported that a team of scientists from Aviagen studied the issue and found that the breed's genetics made it sensitive to being overfed, and when the bird got big, he did not breed as much.

Paul van Boekholt, Hubbard Business Director, told ThePoultrySite: "There are many factors that can affect the fertility of breeder males such as genetics, management and environmental circumstances. We have to realise that though the breeder males only represent about 10 per cent of the total breeder population, they do represent 50 per cent of the genetic value of its progeny.

"At Hubbard, we make fertility a priority in all Hubbard male lines through a rigorous and balanced genetic selection program. Consequently Hubbard has achieved worldwide claim for optimum fertility and hatchability, which is proven by the fact that the Hubbard males are the market leader in US, the largest market in the world.

"Increased prices in the US chicken market can be caused by technical factors but even more so by several important macro-economic variables which cannot be controlled by the producers themselves, so it is very difficult for us to comment in detail on this matter," said Mr van Boekholt.

The US National Chicken Council (NCC) in its Washington Report confirmed that there is a shortage in the supply of breeder birds and that this is impacting the sector at a time when demand has been strengthened by significant hikes in the prices of beef and pork.

Some fertility issues in breeder stock are exacerbating the problem, says the Council, and citing a report in Reuters, it added that it could be well into next year before the the industry will be able to increase supply significantly.

The causes of this situation can be traced back to 2011, when $8-per-bushel corn pushed up feed prices, the US economy was experiencing a downturn and the poultry processors cut back on both meat production and the numbers of breeding birds.

Now that feed prices have come down from those volatile peaks and the prospects for this year's harvest point to lower prices still  highs, poultry breerders in the US are beginning to build up their flocks again.

It can take 18 months to rebuild breeder stock - 25 weeks for breeder stock grandparents to mature, another 25 weeks for the breeder parents to mature, then an additional 25 weeks for the breeders sold to growers to mature and become productive, according to Mike Cockrell, chief financial officer at Sanderson Farms told the NCC.

The US Agriculture Department in its latest report reduced its forecast for US chicken production for this year to just one per cent over the 2013 level. This compares with a long-term average annual rise of four per cent. The same report predicts an increase of 2.6 per cent for 2015. This slow growth in production coincides with strong demand from export markets; US exports of poultry for meat are projected to reach 3.4 million tons in 2014, up from 3.1 million last year.

Economist Paul Aho told the NCC that a lack of accommodation for newly born breeder birds after the 2011 cutback is slowing the rebuilding process, and that the reduced production has pushed chicken prices in Georgia to a record high of $2.21 a pound and the price of chicken breasts in the Northeast are 50 cents per pound higher at $2.02 per pound.

Bill Roenigk, former NCC senior vice president and chief economist, explained that high prices would normally spur chicken companies to increase production by at least five per cent but the shortage of breeders is holding them back.

He said: “Right now they’re scrambling to really put any egg in the incubator that can be in the incubator.”

According to the NCC, breeders are keeping their birds in production for an additional five weeks beyond the usual 65 weeks of age to compensate for the shortage of young breeding birds.

This move may not cover the gap in the market completely as egg hatchability tends decline with flock age. Analyst, JP Morgan, stated in March that the number of eggs per laying hen fell below the 10-year average for the first time since 2010.

Jackie Linden

Jackie Linden



Our Sponsors

Partners


Seasonal Picks

Meat Cuts and Muscle Foods - 2nd Edition