The chart of the week is the change in annual chicken output. On Wednesday the USDA once again lowered their expectations for total chicken production for 2009. Chicken production this year is now forecasted at 35.4 billion pounds which if realized would be 3.1% less than last year and the smallest since 2006. Why is this occurring? Well, as I have mentioned in previous notes, chicken producer margins have been challenged by inflated feed costs and relatively depressed chicken breast prices. So much so that the nation’s largest chicken producer filed for chapter 11 bankruptcy protection. Why is the downturn in production significant? Well, to put it simply, 2009 will likely experience the first downturn in chicken output in 34 years. Yes, US chicken production has increased annually every year since 1975. Now this is not only significant because of the long string of output increases that is likely to be broken this year. It’s significant because the chicken output decline is also a precursor of what’s occurring in the other protein and dairy markets. Cattle, hog and dairy farmers are all struggling with profitability as well and future production plans are being curbed.
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