April 27, 2010

USDA reports 2% decline in broiler-type pullets hatched

USDA's Chicken and Egg report released late Friday (Apr 23) showed broiler-type pullets hatched in March fell by 2.4% from a year ago.

"We cannot recall such a revision of this size in the past," J.P.Morgan analyst Ken Goldman told investors. He also predicted that yearly increases in total layers will eventually diminish or turn negative, based on the small number of pullet hatchings.

Meanwhile, the number of eggs per layer fell by 1.3% on-year in March, partly due to poor weather and older hens, according to Goldman. It was the sixth drop in seven months and the steepest annual drop since February 2009.

Goldman viewed the report as positive for chicken integrators such as Tyson Foods and Sanderson Farms.

"The longer that the chicken industry stays disciplined with production, the more sustainable today's industry margins can be," he wrote. "With demand increasing and supply poised to remain low at least until the end of calendar 2010 (and probably longer, based on the data in this report), both Tyson and Sanderson can potentially earn higher earnings per share than expected over the next few quarters, at least."