The biggest-ever U.S. corn harvest is spurring poultry farms to expand chicken production, sending domestic supplies of the meat to a record and cutting costs for buyers from Costco Wholesale Corp. to McDonald’s Corp.
Corn fell 50% from its peak during last year’s U.S. drought, boosting profit for Tyson Foods Inc. and other poultry producers and expanding supplies of broiler meat the government says will reach a record this year and next. Wholesale prices will drop 7.1% to 92 cents a pound in 2014, according to the median of seven analyst estimates compiled by Bloomberg.
Chicken companies increased egg production in six of the first seven months this year, government data show. Processors are earning 5 cents a pound compared with losses of 4 cents to 5 cents a year earlier, the National Chicken Council said. More birds mean lower costs for Costco and McDonald’s, and expanding supply may help extend the drop in global food costs that the United Nations says reached a three-year low in September.
"We’re seeing relief with the improved crop this year," said Michael Helgeson, the chief executive officer of St. Cloud, Minnesota-based GNP Co., founded by his grandfather in 1926. GNP uses 9 million bushels of corn a year, a major expense in raising more than 104 million birds, he said.
The wholesale price for U.S. broilers, or young chickens suitable for cooking, will average 98 cents to $1 a pound this year, as much as 15 percent higher than in 2012, the government estimates. The Standard & Poor’s GSCI Index of 24 commodities is down 5.7 percent this year, led by a 39% drop in corn.
There was an average of 345.5 million egg-laying hens in September, 2% more than a year earlier, USDA data show. Production of meat from broilers will rise 2.1% to a record 37.809 billion pounds this year and 2.5% to 38.75 billion pounds in 2014, USDA says.
Feed including corn makes up about 68% of the costs of raising a live bird, according to Tom Elam, president of FarmEcon LLC, an agriculture and food-industry consultant in Carmel, Indiana. While that’s less than the 72% cost for hogs and as much as 85% for cattle, poultry farmers can move more quickly to expand production.
It takes as few as eight to 10 weeks from the time an egg is laid until the bird enters the processing plant. That means a farmer can add more hens and expand production in about six months, Elam said. Boosting output takes about a year for hogs and about three years for cattle.