January 22, 2009
More poultry production cutbacks in the US seen
Further reduction in poultry output is seen to reach break-even levels for processors as foodservice sales continue to slide.
More poultry production cutbacks in the US seen
Further reduction in poultry output is seen to reach break-even levels for processors as foodservice sales continue to slide.
Analyst Heather Jones of BB&T Capital Markets in North Carolina said last week's December retail sales data on real (deflated) food purchases away from home showing a 6.7 percent year-on-year decline.
Jones noted that a 7 percent to 8 percent cuts in [chicken] production were likely enough to at least return pricing to break-even levels. But if December's sales data is truly representative of current consumer demand and conversations with industry sources would support that assertion then further cuts will be required, she said.
Jones said foodservice accounts for an estimated 40 percent to 45 percent of total chicken sales, making the 6.7 percent foodservice demand decline translate into a 3 percent drop in total demand. She also noted decreased chicken export demand.
She added that as much of the industry is struggling, it will not be too long before it responds to the new demand dynamics.
In recent months, speculations abound that Tyson Foods is cutting back production. Jones foresaw that Tyson may have to write down its poultry inventory during its fiscal first quarter.
Sanderson Farms, however, was recently quoted by news wire Bloomberg as saying it will not make any further production cuts.
