A collapse in demand for foodservice products could mean long-term pain for the chicken and turkey industries.
Business disruption for restaurants
Foodservice is suffering from the COVID-19 pandemic. Restaurants relying on dine-in traffic fared the worst. Many consumers are reluctant to resume their old habits and social-distancing guidelines make it impossible for restaurants to optimize their space. Some experts believe the pandemic will cause more than 20% of restaurants to permanently close.
Prior to the pandemic, foodservice captured more than half of the consumer food dollar spent on meat and poultry. With such widespread and permanent damage being inflicted on the sector, it is difficult to imagine a scenario where protein demand follows a fast-track path to recovery.
Chicken, turkey prices up and down so far
Meat and poultry prices languished initially when lockdowns were enacted around the U.S. Markets rallied, however, as the pandemic forced plant closures. More than 40% of beef and pork processing capacity went offline briefly while more than 10% of poultry processing capacity was also sidelined for a stretch.
In May 2020, boneless skinless chicken breast prices briefly exceeded $1.60 per pound (U.S. Department of Agriculture Northeast) while wings topped $1.80 per pound temporarily. As the supply gap closed, broiler markets faced downward pressure despite the industry not yet running at full speed. By contrast, turkey prices established more of a bullish posture heading into summer.
Beef, pork, and chicken prices rose sharply in May because of plant closures and other COVID-19 related supply disruptions, but soft demand is dragging prices downward.
However, it should be noted that turkey is subject to different seasonal influences than the other protein categories and domestic per capita availability of turkey is at its smallest level in more than three decades. It all adds up to a very bleak picture for meat and poultry demand.
Tough times likely ahead for meat and poultry producers
The “good news” for poultry companies – chicken, especially – is that the relative affordability of their products combined with heavy exposure to the fast-food and take-out side of the foodservice industry, which is faring much better than the dine-in segment, creates at least a few opportunities. That said, it seems clear the next year or two won’t be easy for anyone.
