Top broiler companies contend with COVID-19 in 2020

Chicken production in the United States continued to expand in 2020, despite a global pandemic which slowed work, created demand upheaval and injected short- and long-term uncertainty into the market.

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COVID-19 presented two key challenges: a shift in demand and new expenditures focused on controlling the disease. (monsitj | iStockPhoto.com)
COVID-19 presented two key challenges: a shift in demand and new expenditures focused on controlling the disease. (monsitj | iStockPhoto.com)

Chicken production in the United States continued to expand in 2020, despite a global pandemic which slowed work, created demand upheaval and injected short- and long-term uncertainty into the market.

Industry performance at a glance

According to WATT Global Media’s annual Top Broiler Companies survey, in total the top broiler companies produced 984.74 million pounds of ready-to-cook chicken (RTC) on a weekly basis in 2020. That’s 25.7 million pounds – or about 2.7% – more than the 959.04 million pounds produced on a weekly basis in 2019. By comparison, the same figure increased by about 5% between 2018 and 2019.

Half of the 32 companies included among the top broiler companies increased production between 2019 and 2020. According to survey responses and industry research, 16 increased their RTC production, five decreased production and eight did not change. Three companies – Lincoln Premium Poultry, FreeBird Chicken and Empire Kosher – are debuting or returning to the listing of the top broiler companies.

The year of the pandemic

The world changed in March 2020 when COVID-19 rapidly spread around the globe, causing panic, confusion and uncertainty while testing global financial markets and institutions. The year was defined by the disease and the measures used to slow its spread.

For the chicken industry, COVID-19 presented two key challenges: a shift in demand and new expenditures focused on controlling the disease inside company facilities and processing plants.

First, demand for foodservice evaporated as COVID-19 precautions yielded stay-at-home orders, school closures, cessation of most travel and hesitation to dine out. This demand shifted to retail first with panic buying then with a sustained shift toward eating at home. Processors were forced to reorient their operations to accommodate this demand change.

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More Americans ate at home due to COVID-19 and demand for chicken at retail rose in 2020. (Jaimieandkyleshootstock | Bigstock)

For example, in November 2020, Tyson Foods Inc. CEO Dean Banks said the company’s chicken segment’s operating income fell to $122 million in its fiscal 2020 from $621 million in its fiscal 2019. He said the pandemic and the demand from foodservice played a role in that decline.

Second, integrators took on a twin challenge of keeping plants open and staffed while protecting workers on the job. Many took on new expenses such as personal protective equipment, social distancing devices, air filtration, symptom screening technology, COVID-19 testing, expanding their health plan’s coverage of COVID-19 illnesses, paid leave and attendance bonuses.

Tyson, according to a December 2020 statement outlining its response to COVID-19, said it spent $540 million on various measures to control the disease including new staff, employee pay and benefits, new health clinics and other protective measures.

Market analysts like Christine McCracken, executive director for animal protein at Rabobank, and Mark Jordan, executive director of LEAP Market Analytics, said 2020 closed with spiking feed costs and 2021 figures to be difficult from a feed cost standpoint.

The emergence of multiple COVID-19 vaccines at the end of 2020 indicates there may be a return to normalcy by the end of 2021. However, the effects of the pandemic may linger for years as integrators clear frozen stocks and continue COVID-19 control measures inside their plants and offices.

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2020 closed with spiking feed costs and 2021 figures to be difficult from a feed cost standpoint. (A_noina | Shutterstock.com)

New facilities and improvements

Despite the pandemic and the upheaval it caused, poultry companies continued to carry out improvements and open new facilities in 2020.

In 2019, four new poultry plants came online. No new plants were added in 2020, but one company – Farmers Pride Inc. doing business as Bell & Evans – kicked off construction of a new, $330 million processing plant in Fredericksburg, Pennsylvania in September 2020. That facility is expected to be operational by late 2021 and will double the company’s current production capacity. It will expand production at its hatchery, also in Fredericksburg, by more than 40%, too.

Other companies expanded existing facilities:

  • Tyson completed a $87.6 million expansion of its poultry complex in Union City, Tennessee, in July 2020.
  • Koch Foods Inc. continued its work on a $50 million feed mill in Attalla, Alabama, that will support its poultry plant in Gadsden, Alabama, which recently received an $80 million expansion. The feed mill is expected to be operational in fall 2021.
  • In 2020, Case Foods Inc. completed $52.5 million worth of improvements to its Goldsboro, North Carolina, facility – including VRT storage freezer upgrades and wastewater upgrades – and a $58.5 million expansion of its Winesburg, Ohio, expanding its processing capabilities and converting it from a large bird to small bird operation. It is planning another $65 million worth of upgrades to the Winesburg facility in 2021.
  • Harrison Poultry Inc. opened a new, $53 million feed mill in Crawfordsville, Georgia, which increased its milling capacity to 24,000 tons per week from 5,500 tons per week in 2020.

More improvements are planned for 2021 and beyond:

  • In January 2020, Tyson announced plans to spend $27 million on upgrades to its prepared foods plant in Caseyville, Illinois. In August 2020, it announced plans to expand its sandwich plant in Amherst, Ohio. In December 2019, it announced plans to expand its prepared foods plant in Hutchinson, Kansas.
  • In October 2020, Pilgrim’s Pride Corp. announced its intent to invest $75 million to expand its poultry plant in Cold Spring, Minnesota.
  • In January 2020, Wayne Farms LLC announced plans for a $16.9 million expansion and upgrade of its fresh production facility in Laurel, Mississippi.
  • In 2021, Simmons Food Inc.'s prepared foods division will add dark meat deboning capacity to the $300 million poultry processing facility it opened in Benton County, Arkansas, at the end of 2019, according to its 2020 WATT PoultryUSA survey response.
  • In November 2020, Shenandoah Valley Organic LLC announced plans to build a second poultry plant in Harrisonburg, Virginia. The new facility will increase production capacity and retail packaging.

Mergers and acquisitions

2020 featured few transactions which increased or decreased the size of chicken processors. A few companies did make moves to expand their business or to hone their focus on key sectors, however.

White Chickens In Poultry House 8

Caption: 2020 featured few transactions which increased or decreased the size of chicken processors. (ugurerden | iStock.com)

The most notable transaction was one that did not take place. In October 2020, Sanderson Farms Inc. announced it received an unsolicited offer to be acquired by Durational Capital Management for $142 per share – or more than $3 billion – which it declined. In a statement, the company said the offer substantially undervalued the company and its future prospects.

In January 2020, Tyson sold Golden Island Jerky Co. to Jack Link’s Beef Jerky leading to the closure of the Golden Island Jerky production facility in Rancho Cucamonga, California. In November 2020, Tyson Foods announced significant expansion plans for its international poultry business including investments in Asia and Europe to expand its cooked chicken production capacity.

In February 2020, JBS – the owner of Pilgrim’s Pride Corp. – agreed to purchase Empire Packing Company’s case-ready meat production facilities and its Ledbetter branded products for $238 million. The acquisition includes facilities located in Cincinnati; Denver; Mason, Ohio; Memphis, Tennessee; and Olympia, Washington.

 

 

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