Top executives at three of the largest United States chicken companies spoke at the Food Media Summit on April 19 and shared this message: Feed costs are a serious challenge to profitability due to high and volatile corn prices, but U.S chicken is positioned to tap what is forecasted to be soaring global demand for meat protein.
The U.S. chicken industry's outlook is bright, despite near-term concerns about feed costs and consumer demand, according to executives from Pilgrim's Inc., Sanderson Farms and Perdue Farms. The panel discussed ways in which the U.S. poultry industry is responding to high feed ingredient costs, including the importation of foreign grains by U.S. producers.
Challenged by high feed costs but profitable for now
Lampkin Butts, president and chief operating officer, Sanderson Farms, said that with broiler egg sets around 200 million a week the U.S. chicken industry is profitable today, even with delivered corn prices averaging $8 or more a bushel for much of the past year.
"Given today's market prices for chicken, the summer months ahead look profitable for the industry," he said during a panel discussion.
"There's that potential," Butts said, "when two things happen at the same time-when grain prices moderate and U.S. employment rates improve, which would boost the demand for chicken. When both things happen in the same year, it will be a nice ride for the industry."
Renewable Fuel Standard has forced industry consolidation
Potentialities aside, Butts and panelists from Pilgrim's and Perdue Farms discussed how the U.S. poultry industry has suffered a dozen bankruptcies or closures of companies in the seven years since implementation of the U.S. Renewable Fuel Standard due to high and volatile corn prices. With 40 percent of the nation's corn supply now going to produce ethanol for fuel, the chicken industry has reduced production by about 10 percent from 2007 levels to remain profitable.
Chicken producers, nonetheless, are the best positioned of the meat proteins to weather the high feed costs due to chicken's superior feed conversion compared to the red meats.
Chicken's feed conversion provides competitive edge
Bill Lovette, president and CEO, Pilgrim's Inc., said the U.S. chicken industry has important advantages over red-meat competitors. He cited numbers that explain why chicken's competitive edge becomes more pronounced during periods of high feed costs.
"It takes about 18 pounds of feed to produce a pound of boneless beef and about 11 pounds of feed to produce a pound of boneless pork. It takes only about three pounds of feed, however, to produce a pound of boneless chicken," he said.
What's more, it takes much less time now to grow the chicken to four pounds or eight pounds. "Using today's genetics and nutritional science, we can grow a four-pound chicken in about 34 to 35 days whereas it once took six weeks to grow a chicken to that size. So the land is not tied up as long and we can produce more pounds per acre," he said.
Chicken production increasing in Brazil, China
Jim Perdue, chairman, Perdue Farms, noted that chicken production is on the increase in a number of countries due to the protein's efficiency in feed conversion. The top three producers in the world are the U.S., China and Brazil.
"Chicken is the most efficient converter of grains to protein among the meat proteins. That's why China, for example, is focused on chicken. They know more meat protein will be produced by chicken than by pork from their corn crops. That is why China is changing to chicken production as quickly as it can," he said.
Competition in world markets
The chicken industries most focused on exporting their products, however, are in the U.S. and Brazil. Both industries have access to huge stocks of domestically produced grains. Each has its sights on a world population expected to surpass 7.5 billion by 2020 and 9 billion by 2050. This will result in increased demand for proteins, especially in developing countries.
Protein demand is forecast to grow 70.2 percent in Africa, 48.7 percent in Southeast Asia, 47.7 percent in North Asia and 41.4 percent in the Middle East. Compare that to the 7.5 percent growth forecasted for North America.
U.S. grown and produced chicken is well positioned to fill global needs for several reasons. Lovette cited the value and affordability of U.S. produced chicken and a national distribution and logistics system that is superior to that of its chief competitor, Brazil. Not only are U.S. producers able to more efficiently access domestic feed ingredients and ship their products overseas, they are now investing in port facilities to tap corn and soybean meals supplies from places like Brazil and Argentina.
US meat, poultry producers now importing South American grains
The importation of foreign grains is a significant development for U.S. meat and poultry producers as they respond to high and volatile grain prices. For example, Pilgrim's parent company, JBS USA, and other U.S. meat and poultry producers, have invested in port facilities to allow the company to import grains from Brazil and Argentina.
"Because of the drought last year and the resulting increased demand for U.S. corn and the reduced supply, our company has begun importing corn from South America for the first time. About 10 percent of Pilgrim's corn needs from late December to July will be imported from Argentina and Brazil," Lovette said.
Other U.S. meat and poultry producers who are importing and feeding foreign grains include Smithfield Foods, which feeds foreign wheat to its North Carolina pork herds, and Cargill, which has cattle herds and turkey flocks.
US poultry producers compete worldwide
"The case is good for a positive outlook for the U.S. chicken industry today, but there's a case for an even brighter future," Lovette concluded. "Our industry has companies that are all-protein and all-planet in their efficiency in getting chicken products to markets around the world."
The Chicken Media Summit, sponsored by the National Chicken Council and U.S. Poultry & Egg Association, was held April 17-19 in New Bern, N.C. The executives' panel was moderated by Bill Roenigk, senior vice president, National Chicken Council.