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Where's the Chicken?

Published on: 13:24PM Nov 20, 2008
The chart of the week is Broiler Egg Sets.  First we remember that broiler eggs are typically set 10 weeks before the chick hatched from the egg comes to slaughter for the US chicken supply.  Thus broiler egg set data is a solid indicator of forthcoming chicken production levels.  As the chart suggests, chicken production cutbacks will likely intensify soon. The current 6 week moving average for broiler egg sets is 8% less than last year which suggests that chicken output could trend 6% plus below prior year levels during the early winter. Recently chicken production has been trending roughly 3% below 2007. To put the production declines in perspective, the US chicken industry has not experienced an annual decline in production since 1975. Why is this occurring? Poor chicken producer margins have plagued the industry for the better part of this year due to inflated feed costs and, at times, deflated chicken prices. Our profitability model suggests that almost all of the decline in feed prices during the past 8 weeks has been offset by a decline in the value of the chicken and it’s parts.  For the week ending November 15th, the American Restaurant Association chicken cutout index was at its lowest level in nearly 2 years. So chicken producers are cutting production to minimize loss and tighten the available supply which could be very bullish for chicken prices down the road.
 
Broilereggs1 
 
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