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broiler chickens Credit: buhanovskiy/iStock/Thinkstock.

Chicken prices supporting expansion plans

Chicken production now expected to show increase closer to 2%.

Chicken prices at the wholesale level have posted an impressive, if not astounding, rally since late last year, the Livestock Marking Information Center (LMIC) reported.

The Northeast breast meat price quote from the U.S. Department of Agriculture’s Agricultural Marketing Service (AMS) during December was 88.72 cents/lb., up slightly from the lowest monthly average price in modern times of 85.30 cents.

For the last month, LMIC noted that breast meat prices have been holding close to $1.30/lb. Wing prices ended last year at around $1.45/lb., hit the $2.00 mark on occasion during April and have been holding above $1.90 without a struggle, LMIC further noted. Prices for leg quarters averaged below 30 cents/lb. from November 2018 to January 2019. Since mid-March, they have been in the low 40-cent range. 

“All of that translates into a favorable profit margin situation since February -- an extreme turnaround from the situation of negative margins that existed from around Labor Day of last year into the first few weeks of 2019,” LMIC said.

Chicken production was about unchanged during the first quarter of 2019 compared to a year ago, which LMIC said was a consequence of 0.5% lower hatchery output during the fourth quarter of 2018. Hatchery output during the first three months of this year, however, was up 1% from a year earlier, which LMIC said is “a notable turnaround.”

“The magnitude of the bounce in chicken prices was not expected at the start of the year, and accordingly, the degree of recovery in hatchery output was not anticipated to be as quick,” LMIC said.

At the start of the year, LMIC had expected chicken production for 2019 to be up 1% from 2018. In light of the recovery in chicken industry profitability, production is now expected to show an increase closer to 2%.

“The forces responsible for the turnaround in the chicken market outlook can probably be tied to the beef and pork markets and to the implications that flow from African swine [fever] in China,” LMIC noted. “Also, a change in Chinese import policy relative to U.S. chicken that was put in place several years ago following an outbreak of avian influenza in the U.S. is a basic assumption.”

Further, LMIC said the behavior of leg quarter prices could be, in part, a precursor to a formalized announcement of that policy change. “U.S. chicken exports are expected to set a new high this year,” the center noted.

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