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Let the Good Times Role for Now
2015-02-13 23:06:00| Food Processing
The mood bordered on joyous at this years International Production & Processing (poultry and meat) show in Atlanta, and for good reason: the jingle of coins in poultry processors pockets was music to exhibitors ears. Flush off a year that some described as the perfect storm, the chicken crowd was flush with cash and ready to invest in the kinds of systems and equipment that can drive down costs and keep their business ledgers healthy for years to come. Its a dramatic turnabout from 2012, when skyrocketing feed prices and water shortages in the Southeast left the poultry segment reeling. Plant expansions were on hold and start-ups were being shelved. Those pressures began to ease two years ago, setting the stage for what may have been the most profitable year in history in 2014, with problems in other protein foods supercharging performance. When corn prices reached $8 a bushel, cattle producers started sending livestock to slaughter earlier than normal. That resulted in depleted supplies when feed prices started falling, setting the stage for sharp price increases at retail. Given the long lead times required to beef up supplies, sky-high prices may be the new normal. Pork is another protein option, and the porcine epidemic diarrhea virus (PEDv) crippled supplies. The mortality rate of piglets born from PEDv-infected sows may have reached 40 percent, some sources calculate. Overall, there was a shortfall of 8-9 million pigs coming to market in 2014, according to William Sawyer, an analyst with the food & agribusiness research and advisory division of Rabobank International in New York. The (pork) industry has responded almost too well, he adds, and theres now a glut of pork, as reflected in a 40 percent decline in hog futures compared to six months ago. Lower retail prices for pork should take some market share this year from chicken, though Im not convinced trading down is as fluid as we think, says Sawyer. Ham has to be on a McMuffin, not chicken. Nonetheless, porks got a bigger protein sheriff in town, and that could take some of the wind out of poultrys sales. As with any commodity, poultry is subject to boom-bust cycles, and some in the business point out theres only one way to go when the cycle peaks. Nine months ago, USDA was forecasting a 2.2 percent increase in broiler production in 2015. Current estimates call for a 3 percent increase, and Sawyer is forecasting 4 percent. Capacity is increasing, thanks to the Jan. 5 startup of Sanderson Farms $124 million facility in Palestine, Texas, and new plants in Delaware and Pocahontas, Ark., possibly opening later this year. On the other hand, fast-food operators are adding new chicken items to their menus, weaning their customers away from ground beef, which used to be cheaper than chicken breast but now is the protein price pacesetter. Renewed growth in demand for ethanol could push corn prices up, putting a crimp in poultry growth, and exports--which account for about 20 percent of U.S. production--are vulnerable to a variety of factors beyond anyones control, such as the Russian ban on western food products, Asian fears of bird flu in poultry shipped from the West Coast, and an even stronger U.S. dollar. But domestic consumption can pick up the slack, with dark meat that traditionally was tagged for export going into value-added ground products. The healthy-eating trend also bodes well for chicken and turkeys low-fat protein. That trend is tied to a better-educated public, but theres also a strong correlation between income level and poultry consumption. WATT Global Media underscored that fact with a bar chart at its IPPE booth. At households with income of $10,000, poultry consumption averages 20 kg/44 lbs. per year, the low point. From there, there is a steady rise, to 50 kg/110 lbs. at the $95,000 income level. WATT statistics also make it clear that the U.S. stands head and feet above the rest of the world in poultry production. Four of the worlds Top 10 processors are U.S. operations, with Tyson leading the pack with 1.9 billion lbs. processed per year. Pilgrims Pride (1.7 billion lbs.) is third, almost double the output of No. 4, JBS in Brazil. Sandwiched between Pilgrims and Tyson is BRF S.A., another Brazilian food processor.
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Category:Food and Related Products