PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 17:23 UK, 19th May 2011, by Agrimoney.com
Broiler brinkmanship showing signs of playing out

Are some broiler farmers blinking?

Analysts who warned last month that producers were engaged in a "game of chicken" - refusing to cut output despite higher feed prices, in the hope of raising market share have highlighted signs that some may have thrown in the towel.

The numbers of eggs set in incubators in the week to May 14 was, at 207.3m, 1.6% lower year on year, the biggest rate of decline recorded for 16 months.

It was also 2.6% below the long-term average, and showing weakness in a time when egg sets typically show a seasonal uptick.

Production implications

But this apparent caving in to squeezed margins, which to judge from government figures fell to a record low earlier this year, does not guarantee that producers have done enough to reinflate them, Paragon Economics and Steiner Consulting said.

For one, producers appear to be making a better fist of hatching eggs into viable birds, to judge by chick placement data.

A second reason is that farmers are growing birds to bigger weights. While total broiler slaughter has fallen 0.3% so far this year to 2.87bn head, meat production is 2.2% higher, at 11.93bn pounds.

Indeed, the US Department of Agriculture has forecast a 2% rise to 38bn pounds in US broiler meat production this year, "with the expansion concentrated mostly in the second half".

For the current quarter, the USDA has trimmed its production estimate in part because of last month's tornadoes, which destroyed "a large number of growout barns, especially in Alabama", USDA analyst Rachel Johnson said in a report on Tuesday.

White vs dark

The good news for chicken producers is that they appear to be selling more dark meat in the US.

The bad is that this alone looks unlikely to repair margins, meaning that they need to do better too from breast meat, which is suffering a long-term decline in customers' affections.

Having been worth four times as much, per kilogramme, as the average for a chicken carcass 20 years ago, breast meat is only 1.5 times more expensive now.

"The industry needs to figure out a way to put more money on breast meat, and one way to do that is to curb the steady growth in breast meat production," Paragon Economics and Steiner Consulting said.

The industry's game of chicken may not be over yet.

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