Feed Costs and Chicken Prices

Implications: Higher feed costs will likely lead to higher chicken prices.

Analysis: Chicken producers have slowed output growth but is it enough?  First we remember that a broiler (chicken) egg is set roughly 10 weeks before coming to slaughter for the chicken meat supply. As has been well documented, inflated feed costs have caused chicken supplier margins to wane in turn propelling chicken producers to cut future chicken output plans. It’s been roughly 3 months since broiler egg sets have begun trending below a year ago which should have caused chicken output gains to at least slow. And they have. Chicken output during the last 3 weeks averaged about 2% above last year which is notably less than chicken production gains earlier this year. Still it’s my belief that additional chicken output cutbacks will need to occur which could be bullish for the chicken markets later this year. Recent market increases from prime chicken products such as wings and breast have been tepid. Additionally, feed costs have risen considerably during the past few weeks due to the inclement weather in the Midwest. Consequently, current chicken producer profitability may actually be worse than when chicken production cutback plans were initiated.