High chicken prices burden US shoppers, favor Tyson Foods.
By Tom Polansek
October 5, 2023 – 3:40 AM PDT
Chicken Prices Reach Record Highs as Consumers Shift Preferences
CHICAGO, Oct 5 (Reuters) – Chicken prices at U.S. grocery stores have hit record highs and are expected to remain elevated. This is due to Tyson Foods and other companies reducing poultry production to increase profits, while inflation-weary shoppers opt for chicken over beef and pork.
While higher chicken prices may benefit top producers like Tyson and Pilgrim’s Pride, consumers will feel the pinch as they try to save money by turning away from higher-end proteins. Profit margins for chicken producers are currently at their highest in a year.
According to data from the U.S. Department of Agriculture, U.S. consumption of chicken is projected to exceed 100 pounds per person this year for the first time ever. On the other hand, beef consumption is expected to drop to its lowest level since 2018 due to rising prices caused by dwindling cattle supplies.
Meanwhile, pork consumption has reached its lowest point since 2015 as a result of consumer spending cuts. Tyson, which sells chicken, beef, and pork, faced a surplus of chicken after earning massive profits during the COVID-19 pandemic when meat prices soared.
To reduce costs, Tyson announced the closure of six U.S. chicken plants, affecting nearly 4,700 employees. Analysts predict that Tyson’s chicken business likely returned to profitability in the quarter ended Sept. 30 after two quarters of operating losses.
Tightening supplies are now benefiting producers’ bottom lines. U.S. facilities that hatch chicken eggs placed about 2.8% fewer eggs in incubators in the six weeks ending on Sept. 23 compared to the previous year. This is a significant turnaround from the same period in 2022 when hatcheries set 3.6% more eggs in incubators.
Chicken producers also placed about 2.7% fewer chicks for meat production over the same six-week period, compared to a year earlier when there was a 4.5% increase.
According to U.S. data, cumulative placements for 2023 dropped below last year’s levels around the end of May.
“They cut back,” said Bob Brown, an independent livestock market analyst. “That seems to have buoyed the chicken market.”
An index maintained by Brown, which reflects profitability for poultry producers, shows that chicken prices and feed prices reached their highest level in more than a year in September. Declining feed costs have helped producers improve margins, especially with corn prices near their lowest point in three years.
Chicken companies have also sought to limit the weights of birds this summer as part of their efforts to reduce production and restore profitability. Lighter birds produce less meat for consumers.
In August, retail prices for whole fresh chickens and bone-in legs reached nominal records, according to the latest monthly U.S. Department of Agriculture data. Drumstick prices have climbed 10% from a nearly one-year low reached in February, and wholesale prices have also rebounded.
Although the U.S. government has trimmed its estimate for 2023 chicken production from August, production is still expected to surpass 2022. Producers have taken steps to reduce placements after experiencing a surplus of chicken supplies last year.
Improved U.S. demand is now helping to reduce excess supplies, according to analysts. They forecast positive margins for Tyson’s chicken business in the quarter ended Sept. 30 and anticipate further improvement in the future.
Despite ongoing challenges and large supplies in freezers, consumers are still choosing chicken due to tighter beef supplies caused by reduced herds during three years of drought in the Great Plains.
Reporting by Tom Polansek; Editing by Caroline Stauffer and David Gregorio
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How have major producers like Tyson and Pilgrim’s Pride benefited from the increase in chicken prices, and how are consumers being affected
Hicken prices reaching record highs in the United States as consumer preferences shift towards poultry over beef and pork. This trend is largely driven by Tyson Foods and other companies reducing poultry production to increase profits, while consumers, wary of rising inflation, opt for more affordable chicken.
The increase in chicken prices may benefit major producers like Tyson and Pilgrim’s Pride, as profit margins for chicken producers are currently at their highest in a year. However, consumers will feel the pinch as they try to save money by turning away from higher-end proteins.
Data from the U.S. Department of Agriculture reveals that U.S. chicken consumption is projected to exceed 100 pounds per person this year, a record high. Conversely, beef consumption is expected to drop to its lowest level since 2018 due to rising prices caused by dwindling cattle supplies. Additionally, pork consumption has reached its lowest point since 2015 due to consumer spending cuts.
Tyson, which sells chicken, beef, and pork, faced a surplus of chicken after earning massive profits during the COVID-19 pandemic when meat prices soared. To reduce costs, Tyson announced the closure of six U.S. chicken plants, impacting nearly 4,700 employees. Analysts predict that Tyson’s chicken business likely returned to profitability in the quarter ended Sept. 30 after two quarters of operating losses.
The tightening supplies of chicken are now benefiting producers’ bottom lines. U.S. facilities that hatch chicken eggs placed about 2.8% fewer eggs in incubators in the six weeks ending on Sept. 23 compared to the previous year. This marks a significant turnaround from the same period in 2022 when hatcheries set 3.6% more eggs in incubators. Furthermore, chicken producers placed about 2.7% fewer chicks for meat production over the same six-week period, compared to a year earlier when there was a 4.5% increase.
Cumulative placements for 2023 have dropped below last year’s levels around the end of May, indicating producers’ efforts to reduce production and restore profitability. The chicken market has been buoyed by these cutbacks, as indicated by an index maintained by Bob Brown, an independent livestock market analyst. The index reflects profitability for poultry producers and shows that chicken prices and feed prices reached their highest level in more than a year in September. Declining feed costs have helped producers improve margins, especially with corn prices near their lowest point in three years.
Chicken companies have also sought to limit the weights of birds this summer as part of their efforts to reduce production and restore profitability. By producing lighter birds, there is less meat for consumers, enabling producers to control supply. In August, retail prices for whole fresh chickens and bone-in legs reached nominal records, and drumstick prices have climbed 10% since February.
Although the U.S. government has trimmed its estimate for chicken production in 2023 from August, production is still expected to surpass 2022 levels. Producers have taken steps to reduce placements after experiencing a surplus of chicken supplies last year. Analysts forecast positive margins for Tyson’s chicken business in the quarter ended Sept. 30 and anticipate further improvement in the future, as improved U.S. demand helps reduce excess supplies.
In conclusion, chicken prices have reached record highs in the United States due to reduced poultry production and shifting consumer preferences. While this benefits top producers, consumers are feeling the pinch as they turn to more affordable protein options. The tightening supplies and efforts to reduce production have improved profit margins for chicken producers, but consumers may continue to face elevated prices until supply and demand find equilibrium.
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