NPR  Feb 13  Comment 
China has seen an uptick of cases of the deadly H7N9 strain of the avian flu virus, and authorities are trying to stop it from spreading further. Some areas are closing live poultry markets.
The Economic Times  Feb 12  Comment 
The inter-ministerial panel is also looking at suggesting market reforms in a big way and increasing focus on sub-sectors of agriculture like animal husbandry, poultry and fisheries.
Forbes  Feb 6  Comment 
Tyson Foods, the largest American meat producer by sales, beat expectations with its first quarter earnings report, but its stock has been stuck in negative territory in part because of a newly-disclosed SEC subpoena regarding allegations of a...
Wall Street Journal  Feb 6  Comment 
Tyson Foods said the SEC is investigating its chicken-pricing practices, following allegations meat companies conspired to raise the cost of poultry. It also raised its annual profit forecast and said earnings rose 29%.
Reuters  Feb 6  Comment 
Tyson Foods Inc disclosed on Monday it has received a subpoena from the U.S. Securities and Exchange Commission following allegations it conspired with rivals for years to fix chicken prices.
NPR  Feb 4  Comment 
Picture an organic farm, with thousands of free-range chickens roaming wide-open land. Now picture it from above, from the vantage of a soaring bald eagle. It's an all-you-can-eat buffet.
DailyFinance  Feb 3  Comment 
Filed under: Lifestyle, Food, Food & Drink By: Nathan Rousseau Smith, Veuer Americans are eating more meat than ever. And with chicken becoming such a popular source of lean protein, it should come as no surprise that farmers are having to...
MarketWatch  Jan 27  Comment 
Avian influenza is spreading rapidly across Europe and Asia, roiling the global poultry industry as farmers destroy millions of infected birds.
USDA NASS  Jan 26  Comment 
Ready-to-Cook Weight Down Slightly from Last Year...
Wall Street Journal  Jan 26  Comment 
Avian flu is spreading rapidly across Europe and Asia, roiling the global poultry industry as farmers destroy millions of infected birds. Researchers fear wild migratory birds could bring the new strains to the U.S.




 
TOP CONTRIBUTORS

The U.S. poultry market totaled $43 billion in chicken sales in 2007.[1] Chicken prices are highly dependent on chicken feed prices. In fact, feed costs make up 65% of the cost of raising a chicken.[2] Reliance on corn chicken feed (especially distiller's dry grain--see DDG under Ethanol Production) makes chicken prices susceptible to significant changes in corn prices.[3] Although the skyrocketing cost of corn has increased the cost of producing chicken by more than one-third in early 2008, large domestic supplies have left retail prices relatively unchanged .[4][5]

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Who Benefits From Higher Chicken Prices?

  • Pilgrim's Pride (PPC) and Tyson Foods (TSN), examples of major public chicken protein processors (they hold 25% and 20% of US market share, respectively), benefit when chicken prices rise.[7]
  • Smaller, private chicken producers and processors, such as Perdue Farms with 8% of US market share and Wayne Farms with 5% of US market share, also benefit when chicken prices rise.[8]
  • Chicken feed and feed additive companies, such as Land O'Lakes, Inc. benefit from higher demand of chickens, which results in increased demand for their products.

Who Benefits From Lower Chicken Prices?

Trends and Forces

Increase in Feedstuff Prices Increases the Price of Chicken

Chicken prices are heavily dependent on favorable pricing of feedstuffs, such as corn prices and soybeans, as feed makes up the majority of the cost of raising poultry. Corn prices have risen sharply since the beginning of 2007 - more than 150% in 2007 and early 2008 - as ethanol producers have increased their demand for the commodity (rising oil prices, in turn, have increased demand for ethanol).[9] Corn is also the main input for many other food products such as high fructose corn syrup that are in increasing worldwide demand - but nonetheless the USDA expects U.S. farmers to plant 8% less corn in 2008, lowering supply and increasing prices.[10] Additionally, the June 2008 flooding of Iowa is expected to destroy more than 200 million bushels of corn, further reducing supply.[11] Any long-term, significant increase in feedstuffs prices has the potential to seriously increase chicken prices.

Constantly Changing Global Supply and Demand Cause Prices to Fluctuate

Though chicken prices are mostly responsive to input feed prices, they are also affected by international competition, high domestic production, seasonal fluctuations, and fear of avian bird flu. Though only 16% of total domestic production was exported in 2007, international competition can drive chicken prices up or down.[12] Strong export markets have been the main drivers of the poultry industry's growth, so a global surplus has an adverse effect on domestic producers.[13] Global surpluses can be exacerbated by domestic surpluses, the shortest of which can cause long lasting price swings.[14] Next, seasonal hatchings create a variable supply of chickens which in turn cause prices to fluctuate. Finally, fears of avian flu decrease chicken demand, and therefore chicken prices, as consumers react to outbreaks of the disease and substitute other protein sources, such as pork or beef, for chicken.[15]

Chicken Producers Hope to Transition to Prepared Foods

Chicken producers are transitioning to prepared foods, such as breaded chicken strips, buffalo wings, and chicken nuggets. These products carry a higher margin than fresh chicken, because they are sold one step closer to the consumer on the supply chain - to stores, rather than to butchers who then mark up the meat once again before selling to stores. Furthermore, for companies such as Pilgrim's Pride (PPC), prepared meats decrease feed costs from 33-49% of total production cost to 17-24% of total cost.[16] Rising commodity prices factor into the price that consumers must pay for their chicken, but these input costs cannot be passed on in their entirety. By eliminating an extra step in the sales process, chicken producers can pass a higher percentage of production costs onto the consumer as well.

Chicken Industry Information and Market Share

Pilgrim's Pride (PPC) is the largest producer of US chicken with 25% of the US market.

Tyson Foods (TSN) is the second largest producer of US chicken with 20% of the US market.

Perdue Farms is the third largest producer of US chicken with 8% of the US market.

Wayne Farms and Sanderson Farms (SAFM) are tied as the fourth largest producers of US chicken with 5% apiece of the US Market.

Note: Market share data from Pilgrim's Pride Corporate Fact Sheet

References

  1. US Economic Research Service, "U.S. Broiler Industry: Background Statistics and Information"
  2. The Sacramento Bee, "Midwest flooding will raise corn prices, soak food buyers"
  3. US Economic Research Service, "Corn Prices Near Record High, But What About Food Costs?"
  4. The Sacramento Bee, "Midwest flooding will raise corn prices, soak food buyers"
  5. AgWeb.com, "Cold Storage Report Highlights"
  6. US Economic Research Service, "U.S. Broiler Industry: Background Statistics and Information"
  7. Pilgrim's Pride Corporate Fact Sheet
  8. Pilgrim's Pride Corporate Fact Sheet
  9. National Corn Growers Association Futures Quotes
  10. Associated Press, "USDA Bets on Soy, but Farmers Like Corn"
  11. Reuters, "How much crop acreage lost to floods?"
  12. US Economic Research Service, "U.S. Broiler Industry: Background Statistics and Information"
  13. Charleston Regional Business Journal, "Chicken prices: Gradually coming back to Earth"
  14. Poulvet.com, "Challenges and opportunities for marketing of poultry products"
  15. US Department of Agriculture, "Meat and Poultry Prices Rise"
  16. PPC 2007 10-K, Item 1, pg.5
  17. Pilgrim's Pride Corporate Fact Sheet
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