PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 13:04 UK, 29th May 2014, by Agrimoney.com
No sign of an end to US chicken market tightness

The recipe for tightness in US chicken supplies, which has driven whole-bird prices to record highs, will linger, Sanderson Farms said, as it unveiled a doubling in profits, which were boosted by lower feed costs.

The Mississippi-based poultry group, reporting earnings of $50.99m for the February-to-April quarter, up from $24.37m a year before, said that it was "reasonably optimistic" over prospects, given market dynamics heading into the summer, typically the "peak demand period".

"Demand for chicken products is expected to remain strong," said Joe Sanderson, the Sanderson Farms chairman and chief executive.

However, the pipeline of fresh breeder hens, needed to foster a sustained rise in chicken production, remains "constrained".

"It appears the reduced size of the breeder flock will constrain production over the short term despite higher industry returns," Mr Sanderson said, in comments which echo those from rival Pilgrim's Pride.

Chicken vs beef and pork

Already, "market prices for boneless breast meat sold to our food service customers improved through April and May, and market prices for retail grocery store products have also moved higher", he added.

Wholesale chicken prices for whole birds topped 109 cents a pound for the first time this month in the benchmark Georgia dock market, although values of some other cuts, such as jumbo wings, have proved weaker.

Mr Sanderson attributed the market strength in part to "the relatively high prices of competing protein", which, in the retail sector, has "shifted some consumer demand to chicken".

In the food service market too, "relatively high priced beef contributed to improving demand and market prices during the [February-to-April] quarter for products produced at our food service plants".

Shrinking inventories

The comments follow official data last week which showed that the quest for protein, at a time of constrained production of beef and pork too, was eroding US inventories of all three meats.

Pork stocks in US cold stores at the end of April were down 17% year on year, with those of beef falling 21%, and of chicken dropping 15%.

Pork output has been limited by the outbreak of porcine epidemic diahorrea virus (PEDv), fears for which rose this week after an Indiana farm revealed reinfection with the disease, undermining hopes of immunity in herds which have already suffered an outbreak.

Beef production is being constrained by the depletion of the US herd, its smallest since the 1950s, meaning feedlots face a battle for animals against ranchers seeking to rebuild production, with grain prices lower and pasture conditions improved from those in the 2012 drought.

Grain price outlook

Sanderson Farms, which raised its sales by 6.4% to $660.7m in the latest quarter, also highlighted the role of lower grain prices in supporting profits.

Feed costs were 19.1% lower year on year during the quarter and, while they have moved higher since, they remain below those seen at the same period of 2013.

"We expect grain prices to remain volatile at least until markets get some visibility on the quantity and quality of this year's corn and soybean crops, as tight soy supplies and the lowered corn estimates place a premium on favourable growing conditions this summer," Mr Sanderson added.

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