Chicken prices soar as demand returns to levels not seen since the Covid-19 pandemic.
US processed poultry producer prices hit a record high in May, up 2.1% for the eighth straight month, US government data showed on Tuesday. These increases outpaced the broader producer price index by 0.8%.
According to Barry from Uri, wholesale prices for chicken breasts, tenders and wings are about twice as high this month as last year. The same goes for corn, ethanol, and soybeans.
John Anderson, professor and head of the Department of Agricultural Economics and Agribusiness at the University of Arkansas, Fayetteville, saw this as one of the “aftershocks” of Covid-19.
As global markets rebound and consumers return to spending more, the demand side of the equation is growing rapidly, Anderson said. He ruled out the possibility of a supply shortage that fueled the recent run up, but pointed to signs of inflation across all industries.
US consumer prices have risen every month since January, causing the consumer price index to rise 5% over the past year. This is the largest increase in 12 months since the real estate market collapsed 5.4% in 2008.
“We’re not seeing any crazy levels yet,” said Anderson. “There is upward pressure more or less across the board as the market is heating up a bit after Covid.”
While chicken prices are at record highs, beef prices are still below highs during the coronavirus pandemic when outbreaks caused some U.S. processors to shut down plants. Pork prices are higher than last year, but below the records set during a swine disease outbreak in 2014.
The surge comes after several fast food chains added fried chicken sandwiches to their menus to rival the success of Popeye’s sandwich in 2019. Sales have also increased as consumers prepare more meals at home during the pandemic. Meanwhile, poultry producers are struggling to keep up with growing demand, with labor shortages in meat plants and severe winter storms killing thousands of birds and scarring chicken supplies.
A flaw in the supply chain came from a type of rooster that Tyson Foods used to breed, resulting in lower hatching rates, which resulted in fewer chickens. Chief Executive Donnie King said on a call with analysts that “we made a bad decision” and expect rates will improve over time as Tyson switches to a more traditional breed.
According to data from the U.S. Department of Agriculture, poultry slaughter and production fell nearly 30% this month compared to last year. The amount of chicken in cold stores was less than Â£ 750 million in April, up from Â£ 950 million a year ago. Earlier this month, the USDA revised its forecast for meat production in 2021 due to higher broiler production.
Anderson said he wasn’t that surprised by the price increases and wondered how long the poultry profits will last.
“Can we make a soft landing?” He said. “I think what we’re going to see is how the supply side reacts? How quickly can we bring production back to levels across the economy that match the demand we’re seeing now?”
As wholesale prices rise, retail prices are expected to follow suit. Anderson said retailers who buy products weeks or months in advance will eat some of the profits, but buyers can expect changes to the meat crate in the weeks to come. Hopefully, he said, the trend won’t last too long.