Poultry companies are avoiding production cutbacks in spite of stagnant demand and high animal feed costs, focusing on low debt and a predicted rise in demand to carry them through, according to reports.
The industry's largest companies hope to hold off the possibility of decreasing production for as long as possible. Sanderson Farms said it is counting on the company's low-debt balance sheet to remain steady during the down period, while Tyson Foods Inc. is focusing on an eventual rise in demand coupled with higher chicken prices as consumers switch from the more expensive beef and pork. However, the current situation lends itself to oversupply, according to analysts, who said that chicken eggs are up 0.5% over the same time in 2010 in spite of lower-than-expected consumer demand. Chicken production in the first quarter of 2011 rose 6.4%, and broiler prices dropped in response to supplies, reaching 77.9 cents per pound compared to 2010's 82.2 cents per pound.
Tyson and Pilgrim's Pride are hedged on grain costs for the next several months, but feed prices are expected to remain high through 2012. If the desired conditions of a rise in demand and an accompanying rise in poultry prices don't materialize, the industry expects to see supplies begin declining this summer.
