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Chicken sector maintains steady production

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Demand impacts of COVID-19 put chicken prices on rollercoaster ride.

U.S. chicken plants endured far less COVID-19 disruption in the second quarter than either beef or pork, according to Will Sawyer, lead animal protein economist in CoBank's Knowledge Exchange research division.

In fact, the firm said it expects chicken production to be down only 1% in the quarter versus a nearly 10% decline in red meat production.

“While chicken producers have been able to manage through their production disruptions, demand has been volatile,” Sawyer noted. “The chicken sector swiftly filled retail meat cases when demand shifted from foodservice and the red meat supply dropped. This dynamic put chicken prices on a rollercoaster ride for the last few months.”

Largely driven by new plants that opened last year, the chicken supply increased 8% in the first quarter of 2020, Sawyer said, which pressured industry margins. Spot chicken margins fell to multiyear lows once consumers stopped stockpiling food in April and the reality of absent foodservice demand hit the animal protein and food sector at large, he added.

“When prices bottomed in mid-April, composite chicken prices were 35% below year-ago levels, and margins were worse than what the industry experienced during the Great Recession,” Sawyer said.

Chicken prices have improved since then, in sync with red meat prices, the firm relayed.

Chicken prices are still be below year-ago levels, but industry margins are far better than the lows of April, Sawyer said.

“We continue to expect around 3% industry growth for the U.S. chicken sector in 2020 as its value proposition may appeal to U.S. consumers facing a difficult economic outlook the rest of the year,” he said.

In the latest “World Agricultural Supply & Demand Estimates” report, the U.S. Department of Agriculture raised the 2020 broiler production forecast to 44.64 billion lb., up from 44.04 billion lb. in June. For 2021, USDA raised the broiler production from last month to 45.18 billion lb.

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