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Poultry industry sees recovery, still faces uphill slog

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Price impacts of pandemic probably even more significant for broiler industry than production disruptions.

The poultry industry, battered on multiple fronts by the COVID-19 pandemic, is making modest gains, but recovery into 2021 may be its slowest in nearly a decade, according to a University of Arkansas agriculture economist.

In looking at the U.S. Department of Agriculture’s (USDA) “World Agricultural Supply and Demand Estimates” (WASDE) report for the broiler industry, Anderson noted that there were more complex factors at play than simple supply and demand.

Anderson, who is head of the agricultural economics and agribusiness department for the University of Arkansas System Division of Agriculture and the Dale Bumpers College of Agricultural Food and Life Sciences, has been providing pandemic-related analyses of the economy since March.

“These factors include the supply-side effects of changes in production and processing operations in response to COVID-19 as well as demand-side effects related to the economic disruptions resulting from COVID-19,” he said, adding that these included “continued sluggish demand from the food service sector.”

Anderson said the price impacts of the pandemic were probably even more significant for the broiler industry than the production disruptions. In 2019, broiler wholesale prices averaged 88.6 cents/lb. pound according to the WASDE report.

“At the beginning of 2020, expectations were for prices to slip around 2% in the face of increasing production, he said. “As the pandemic unfolded, though, price expectations deteriorated dramatically. The latest WASDE report projects a 2020 average broiler price of 70.8 cents per pound, a decline of about 20% compared to the prior year.”

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On a positive note, broiler production has rebounded since June, and Anderson said expectations for 2020 production have stabilized at about 1.5% above last year’s production.

“It is remarkable that the industry appears set to manage a modest increase in production given the magnitude of the 2020 market shock,” he said. “Still, current expectations are over 3% lower than in March, illustrating the significant negative impact of the pandemic on the supply side of the market.”

Current expectations as reflected in October WASDE projections are for a relatively slow recovery for the sector. The current projection for 2021 production is 45.06 billion pounds, which is up 1% from 2020, and an average wholesale price of 79 cents per pound, up 12% from last year.

“This works out to an expected wholesale value of production of $35.6 billion: a significant recovery from 2020 but still 8.5% below 2019,” he said.

“If current projections hold, 2020-2021 will witness the slowest two-year growth in broiler production since 2012-2013, when the industry faced record-breaking corn prices,” he said.

 

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