Heavy birds reshape industry’s cost and price dynamics

Broiler sizes are steadily increasing due to efficiencies created by increased weight, but will that trend continue in the future?

(chayakorn76 | Bigstock.com)
(chayakorn76 | Bigstock.com)

One of the most consistent and predictable patterns in U.S. agriculture is the steadily increasing size of the typical broiler bird. 

This is due to growing demand for cut-up parts and deboned meat products that tend to appeal more to consumers when harvested from heavier-sized birds. Processing technology has advanced to accommodate the bigger birds.

The economics of bigger birds

Moreover, heavier-sized birds are cheaper to produce on a per pound basis than their lighter-weight counterparts, further incentivizing chicken companies to raise bigger birds.

With heavier-sized birds, the cost to feed and maintain a breeder supply flock is lower. A complex producing and processing lighter-weight birds requires larger animal numbers, turning over with greater frequency, to match the volume produced at a heavy-bird complex. Additionally, there are fuel savings and related efficiencies created by turning over fewer flocks each year. 

Understanding the trends

Broiler weights increased slightly more than 1 percent annually, on average, over the past 30 years. Much bigger changes are occurring just beneath the surface. 

The total volume of liveweight broiler production coming from birds weighing between 4.26 and 6.25 pounds collapsed to just 26 percent in 2018 from more than 40 percent in 2011, according to U.S. Department of Agriculture Agricultural Marketing Service (USDA-AMS) data. Broilers weighing 4.25 pounds or less at slaughter accounted for a record-low 13 percent of total liveweight broiler production in 2018, down from 17 percent as recently as 2013. 

It should come as little surprise, then, that boneless, skinless (b/s) chicken breast prices (USDA Northeast) averaged a record-low 112 percent of whole chicken prices (USDA national composite) in 2018, down from 158 percent in 2011.  For additional context, b/s chicken breast prices averaged 274 percent of whole chicken prices from 1988 to 2010. 

bird-weight-chart

 The production of broiler birds weighing between 4.26 and 6.25 pounds is dropping while the production of heavier birds is rising.

Will the trend continue?

Given that the majority of capacity expansion in the U.S. broiler industry planned for 2019 and 2020 is geared towards handling birds on the heavy end of the spectrum, it’s evident that weights should keep trending higher in the near term. 

Heavier birds offer cost advantages over smaller ones. It appears that most integrators’ primary focus, at least for now, is still on chasing lower costs. However, given the price signals unfolding in the market that only seem to be intensifying, there will likely be a point in the not-so-distant future when change is warranted. 

Whole chicken prices may prove enticing enough relative to cut-up and deboned products within the next few years that at least a few companies begin to strongly consider filling some of the void that’s been created in the lighter-weight broiler space. 

 

 

Read more by Mark Jordan:

www.WATTAgNet.com/authors/2803

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