Chicken demand was strong during the COVID-19 pandemic, but it may decline slightly as the U.S. gets the disease under better control.
In a WATT Poultry Chat interview, Mark Jordan, executive director of LEAP Market Analytics, said chicken thrived during the pandemic due to its strength in retail and at restaurants best positioned to succeed under the conditions imposed on the market by the disease. He predicts that demand should remain relatively strong as more Americans become vaccinated and pre-pandemic behaviors return, but the market will not be as strong as it was during the pandemic.
Austin Alonzo: How has demand changed during the past year due to the novel coronavirus? And what are you expecting to happen as we start to move away from the pandemic in 2021?
Mark Jordan: This is a huge topic and its going to be an ongoing topic because I think we've had so many head fakes and interesting things happen over the last year on the demand front. And demand, as we know is a little bit tricky to think about. There's a lot of moving parts, you know, income and purchasing power price of competing and substitute products. And then the ever changing tastes and preferences all have a have an effect. And I think during the pandemic that has altered many of those things positively and negatively. And so one of the best things we can do is just look at the data and try and make sense of what's happened and make some reasonable conclusions, hopefully reasonable, about what might happen going forward.
I was going to dive right in and look at a chart that looks at historical prices. And I've got this back down to an annual level. Now when I do this, often I'll get an annual basis, but then drill down on a quarterly or even monthly basis. But this gives an idea of the framework about thinking about demand in terms of looking at historical prices there on an inflation adjusted basis. So I've got everything adjusted for price inflation, but with 2020 as my base year, and then looking at relative to quantity available. So basically your standard PQ chart that we think about in Econ 101.
And we can see your very close relationship, I've got a regression line fitted in there, that really mimics what we would expect for your standard demand curve as quantity has increased. Quantity available has increased, prices have gone down and we think about that with chicken, it's been a common feature prices have gone down on an inflation adjusted basis. But what we see is in various spots is that price sometimes drifts a little bit away from that line. 2004 would be a year, you look at that, it's really stands out as a year of strong demand. 2006, you're going back a little bit, would be a year of weak demand. So what I'm trying to do, and thinking about demand is looking at this, this sensitivity or moves away from the regression line to measure where are periods of relative strength or periods of relative weakness.
So I'll move to the next chart and kind of show what this looks like. Now, taking this is in relation to data that's been analyzed on a quarterly basis. And we can see going back, you know, some of the ebb and flow you see that demand will strengthen for a cycle or so and then back off. And going back in the last two or three years, you know, the 2018 was a really rough year for chicken demand and then look to be strengthening in 2019. Now some interesting things happened, it started to kind of wobble a little bit coming into 2020. So even before the pandemic looked like we were in something of a down cycle, now you go to last spring. And clearly there was a setback. And, you know, in some respects, I think the pandemic definitely had a role, there was a lot of, you know, a lot of uncertainty around how life was going to play out there. And then, but at the same token, you know, it was also part of a trend that seemed to be unfolding the previous two or three quarters. Now what's interesting is, you look at the second half of 2020. Look, what we've seen so far in 2021.
Demand for chicken has really been strong, and carrying a lot of momentum here into the second quarter of 2021. I think one of the interpretations is that, when we were at the early phases of the pandemic, chicken demand was -- there was a lot of negatives there. But as we moved into a kind of a hybrid, sort of where the pandemic was still a present part of life, but people were kind of doing some normal things or quasi-normal things -- getting out, eating at fast food restaurants, doing a lot of pick up orders and things like that -- chicken has really thrived in this environment which sets up an interesting dynamic. As we move forward and past the pandemic.
I think there's some things that you can think about now: consumers have money flows into other things as we get back to normal life, and that could maybe pull back or cause a little bit of weakness on the demand side. But I also think that just getting back to normal, and then also some of the things we've seen with competing meats, there are some positives. So I do think getting past the pandemic is maybe going to kind of cause us to pull back from this spike a little bit, but I think a little bit longer term, second half of this year, even into 2021 chicken demand should remain fairly strong.
This transcript edited for length and clarity.
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