Rob Murphy, senior vice president, Informa Economics, forecast the broiler industry will dip into negative margins for at least the next five quarters in 2015 and into 2016 in a presentation at the Oilseed & Grain Summit in Minneapolis on October 1.
Murphy’s projection, which is on a wholesale-weighted basis of 15 percent whole birds and 85 percent cutout, showed margins slipping into the red by a little over a cent a pound in the first quarter and ending the year at a loss of almost seven cents a pound.
The end of a four-year run of mostly profitable quarters – only three quarters slipped slightly into losses – comes as production in 2016 is projected to reach record levels.
“The real gotcha for the broiler industry is that from late 2014 forward, the number of birds and the average weights have been on a strong uptrend,” Murphy said. “That leads to a very large production of broiler meat.”
"It has been a very profitable run for the broiler industry over the last four years,” he added. “Now [the industry is] going to pay the piper for that because production has ramped up in response to that profitability.”
Referring to a chart with the forecast for the negative margins in 2016, Murphy said, “There is a real chance that broiler producers will lose more than projected on the chart.”