Chicken prices are finally starting to drop


New York
CNN affairs

While some meat prices have fallen over the past year, chicken prices have remained stubbornly high. Strong demand, supply issues and even breeding problems with underperforming roosters kept the pressure high. The supply shortage even caused some restaurants, such as Wingstop, to experiment with less popular items such as thighs.

But now conditions are finally easing, paving the way for future price declines. In the year through October, excluding seasonal fluctuations, chicken prices were up 14.5%, according to data from the Bureau of Labor Statistics.

But in October, prices fell by 1.3% compared to the previous month. And promotions and deals are just around the corner.

The poultry industry has managed to solve one of the problems that caused the supply to drop last year: a poor choice of rooster that led to fewer chicks than expected.

Chicken prices are finally falling.

In May 2021, poultry giant Tyson explained that it was short of chickens due to disappointing results with the type of breeding rooster it pecked.

“We’re replacing a male that, frankly, we made a bad decision,” said Donnie King, Tyson’s then-chief operating officer and Group President, Poultry. There was an “unexpected drop” in the number of hatchlings earlier that year because of the type of roosters used, explains King, now the CEO.

Tyson wasn’t alone in the problem, noted Christine McCracken, executive director of animal protein at Rabobank. “If you look at the industry as a whole, there were productivity issues that challenged several operators,” she said.

Since then, producers “have gone back to a more traditional bird,” she said.

But the roosters aren’t all to blame. Chicken processors were caught off guard by the sudden uptick in demand for food service in 2021 following mass restaurant closures in 2020, explained Grady Ferguson, senior research analyst at Gro Intelligence, an agricultural data analytics company.

The decision to reduce supply in 2020 had an impact on flock size in 2021 – you can’t reduce a chicken flock overnight. In fact, growers in 2020 made a bet that demand would still fall in 2021 and expected a smaller supply to suffice, he said.

But in 2021, demand erupted again. Therefore, the chicken producers were “undersupplied”. [and] unable to meet the demand of this unexpectedly white-hot post-isolation chicken demand,” said Ferguson.

Now that supply and demand are better matched, wholesale prices have fallen in recent months and supermarket prices are starting to follow suit.

It takes a while for lower wholesale prices to reach consumers.

In part, that’s because of long contracts that shield buyers and sellers from volatility. It is also because wild price swings in the supermarket would be shocking to the consumer, so retailers prefer to move prices steadily up or down rather than continue to closely monitor what is happening in the wholesale market.

Still, a fall in wholesale prices eventually leads to a fall in retail prices, which is now starting to happen.

The drop marks a welcome reversal from higher chicken prices this year, which have added another supermarket stressor for consumers turning to chicken as a more affordable alternative to beef and other expensive cuts of meat.

Chicken is still cheaper compared to beef or pork when you look at sticker prices, says Jayson Lusk, chief of the department of agricultural economics at Purdue University.

“If [consumers are] are pinched, their real purchasing power is falling, poultry will seem like a good option. And more supermarkets will probably start offering more promotions on chicken after the holidays.

At this time of year, shoppers typically look for roasts, pot roasts, sausage, and, of course, turkey. Retailers may offer promotions for such seasonal foods to bring in customers.

But customers just aren’t that interested in chicken, so there’s no point in offering promotions on the item during the holiday season.

But that will likely change early next year, Rabobank’s McCracken said, once the holidays are over and people have made new resolutions.

“Everyone switches back to leaner, healthier meats at the beginning of the year,” she said. That means there are deals ahead.

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