Chicken prices at grocery stores across the country have hit record highs, and prices are expected to remain high as inflation-weary shoppers have opted to buy chicken over still-pricier beef and pork alternatives.
Tyson Foods and other companies have also dialed back poultry production, further driving up prices. The higher chicken prices should improve earnings at top producers Tyson and Pilgrim’s Pride ahead of the holiday season.
U.S. consumption of chicken is expected to exceed 100 pounds per person this year for the first time ever, data from the U.S. Department of Agriculture shows.
On the other side of the protein profits, beef consumption is forecast to drop to its lowest since 2018, amid dwindling cattle supplies. Pork consumption is at its lowest since 2015.
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In August, retail prices for whole fresh chickens and bone-in legs reached nominal records, the latest monthly U.S. Department of Agriculture data show.
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Drumstick prices climbed 10% from a nearly one-year low reached in February. Wholesale prices have also rebounded.
With customers paying more, one index shows chicken producer profit margins at their highest in a year.
The higher prices come as companies are reducing their production, scaling down from the busier 2022.
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Arkansas-based Tyson, which sells all three main types of meat, announced the closures of six U.S. chicken plants with nearly 4,700 employees this year to reduce costs following the impact of the COVID-pandemic.
These tightening supplies now favor producers’ bottom lines.
U.S. facilities that hatch chicken eggs placed about 2.8% fewer eggs in incubators in the six weeks ending on Sept. 23, compared to a year earlier, according to U.S. government data.
During the same period in 2022, hatcheries set 3.6% more eggs in incubators to account for a surge of demand.
Chicken producers placed about 2.7% fewer chicks for meat production over the six weeks through Sept. 23 from a year earlier.
During the same period in 2022, there was a 4.5% increase.
Producers have moved to reduce placements after chicken supplies swelled last year.
Tyson CEO Donnie King said in February that executives overestimated how strong consumer demand would be for chicken in late 2022, leaving the company to resell excess inventories at a discount.
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“That was a failure on their part,” said Arun Sundaram, senior equity analyst at CFRA Research.
Improving U.S. demand is now helping reduce excess supplies, Sundaram said. He forecasts Tyson’s chicken business will report positive margins of 1.5% in the quarter ended Sept. 30 before jumping to 4% in fiscal year 2024. Quarterly results are expected in November.
“We’ve seen some recovery in chicken prices, and we’ve seen some consumer prices start to level off,” Tyson CFO John R. Tyson told investors last month. “We probably would have expected that to take place sooner.”
Companies still have large supplies in freezers. U.S. inventories of frozen chicken breasts were a record high for August. Tyson also said this week that layoffs will expand to the second shift at a chicken facility in Wilkesboro, North Carolina, “in response to customer demand,” signaling ongoing hurdles.
Further increases in chicken prices could threaten demand, said Adam Speck, senior commodity analyst for Gro Intelligence.
However, if consumers “see retail beef prices remain high” and are unable to select a protein, then “we should see improving demand for chicken going forward,” said Bill Densmore, senior director for Fitch Ratings.
Reuters contributed to this report.
Original article source: Chicken prices hit record highs under Biden administration as US inflation keeps beef, pork out of reach
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