Wholesale chicken prices up 2.1%
Chicken prices are skyrocketing as demand returns to levels not seen since before the covid-19 pandemic.
U.S. producer prices for processed poultry hit a record high in May, climbing 2.1% for the eighth consecutive monthly increase, U.S. government data showed on Tuesday. These gains exceeded the 0.8% increase in the broader producer price index.
Wholesale prices for chicken breasts, fillets and wings this month are about double what they were last year, according to data from Urner Barry. The same goes for corn, ethanol and soybeans.
John Anderson, professor and head of the Department of Agricultural and Agri-Food Economics at the University of Arkansas, Fayetteville, saw this as one of the “aftershocks” of covid-19.
As global markets recover and consumers start spending again, the demand side of the equation is rising rapidly, Anderson said. He ruled out the possibility of a supply shortage fueling the recent acceleration, but pointed to signs of inflation across sectors.
Consumer prices in the United States have increased every month since January, leading to a 5% increase in the Consumer Price Index over the past year. This is the biggest 12-month increase since there was a 5.4% increase before the housing market collapsed in 2008.
“We’re not seeing crazy levels yet,” Anderson said. “More or less across the board, there is upward pressure as the market heats up a bit after the covid.”
As chicken prices hit record highs, beef prices are still below peaks in the coronavirus pandemic when outbreaks led some US processors to close factories. Pork prices are higher than last year, but lower than the records set in 2014 during a swine disease outbreak.
The increase comes after several fast food chains added fried chicken sandwiches to their menus in order to rival the success of Popeye’s sandwich in 2019. Sales have also increased as consumers prepare more meals at home for the pandemic. Meanwhile, poultry producers have struggled to meet growing demand, with labor shortages at meat factories and severe winter storms that have killed thousands of birds, reducing the chicken supply.
One problem in the supply chain was with a type of rooster that Tyson Foods used for breeding, which resulted in lower hatch rates, resulting in fewer chickens. Managing Director Donnie King said on a call with analysts that “we made a bad decision” and we expect rates to improve over time as Tyson shifts to a more traditional breed.
Poultry slaughter and production fell nearly 30% this month from a year ago, according to data from the US Department of Agriculture. The amount of chicken in cold storage was less than 750 million pounds in April, down from 950 million pounds a year ago. The USDA revised its meat production forecast for 2021 earlier this month due to higher chicken meat production.
Anderson said he wasn’t very surprised by the price increases and wondered how long the poultry gains would last.
“Can we do a soft landing?” He said. “I think what we’ll see is how supply reacts? How long can we ramp up production throughout the economy to a level that matches the demand we’re seeing now?”
As wholesale prices rise, retail prices are expected to follow. Anderson said retailers, who buy products weeks or months in advance, will consume some of the gains, but buyers can expect to see changes in the case of the meat in the coming weeks. Hopefully, he says, the trend won’t last too long.