February 14, 2007

 

US poultry industry to cut production to remain profitable for 2007

 

 

Higher input costs and greater poultry supplies nationwide has resulted in losses for major poultry companies for 2006, thus poultry companies may be reducing production numbers to claw their way back to profits, industry experts said.

 

In 2006, high energy costs, rising grain prices and bird flu fears have erased the strong growth achieved in the past two years, Delmarva Poultry Institute Executive Director said earlier this month.

 

Top poultry companies, such as Gold Kist, Sanderson Farms, Pilgrim's Pride and Tyson foods all suffered losses last year.

 

Currently the industry is raising chicken prices to offset higher feed costs as more corn it diverted for the production of ethanol.

 

USDA figures indicate more than 1.6 billion bushels of corn would be used for ethanol in 2006 and the total could increase to 2.1 billion bushels by the end of the year.

 

However, poultry suppliers have yet to be able to pass all of the costs on to the consumer because current supplies for beef and pork are also high, making it a competitive meat market. 

 

The feed issue has been a big concern, said Michael Sheats, the chief of poultry market news and analysis with the USDA. Consumers may not necessarily want to pay more for chicken meat just because it costs more to produce, he said.

 

Poultry production has already slowed down compared to last year and prices are recovering, Sheats said. Bird weight, however, is also decreasing slightly.

 

A comparison from Feb 3 to the same time last year shows 6 million fewer chickens slaughtered, and prices are now up to about 73 cents from 63 cents.

 

Analysts in the industry said companies are making efforts to increase demand, especially in dark meat, but for now, a cut in production is increasing profitability hopes for 2007. Production in 2007 may be about 1 percent more than in 2006 due to cutbacks on production to create profitability.