Chicken Producer Margins and Demand

Published on: 10:30AM Feb 20, 2009

The chart of the week is chicken-feed cost ratio and the boneless skinless chicken breast market. The chart below is busy, but it tells the tale how as boneless skinless chicken breast prices trend, so does chicken producer profitability. And as the chart depicts, both are historically depressed. The producers have made unprecedented cutbacks as of late. During the last 3 weeks, chicken production is estimated to have been 6% plus below year ago levels. This follows various weeks during the end of 2008 where chicken output was 8% plus below the previous year. Chicken breast prices did rally early this year but have declined during the past 2 weeks. At the same time, beef prices have declined and the pork markets have remained historically depressed. Why is this occurring? This is about demand. And the concern from the producers standpoint is that this recent slowdown in protein demand may not be temporary. If this continues look for additional chicken production cutbacks in the coming months unless producers can get some relief from the feed cost side.

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