Survey: Farmers make changes due to price pressure

Respondents to the WATT/Rennier Poultry Confidence Index weigh in on how chicken prices are changing their production practices and whether new plants coming online will replace older processing facilities.

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Courtesy U.S. Poultry & Egg Association
Courtesy U.S. Poultry & Egg Association

A slim majority of chicken farmers are making live production changes in response to lower-than-normal chicken prices, according to the results of a new survey.

In the first quarter of 2019, about half of the poultry producers included in the WATT/Rennier Poultry Confidence Index survey said they are modifying their growing program in some way due to depressed commodity chicken prices.

As part of the quarterly survey, WATT Global Media is asking additional questions about the state of the industry as well as emerging trends, technologies and challenges. This blog post reflects the results of supplemental questions included in the first quarter survey conducted in February 2019. The next installment of Dr. Greg Rennier’s column reflecting the results of this survey will be published in the April 2019 issue of WATT PoultryUSA.

Industry response to lower prices

The chicken industry endured historically low boneless, skinless breast meat prices at the end of 2018. Some signs are pointing toward improvement in the near future, but for now the chicken market faces tough global trade conditions as well as forecasted increases of domestic production of both chicken and its competing proteins.

According to the survey results, a slight majority of farmers are taking some kind of action in response to pricing pressures. However, nearly half are standing pat.

Those in the survey group were asked: “In response to the record low wholesale breast meat prices and relatively low leg quarter prices, please indicate any of the following actions that have been initiated in your live operations.”

  • 49.3 percent responded, “No changes to our growing program.”
  • 31.5 percent responded, “Extended cycles on farms, more downtime between flocks.”
  • 23.3 percent responded, “Reduce placement density to give birds more room.”
  • 23.3 percent responded, “Processed broilers at younger ages to reduce slaughter weights.”
  • 16.4 percent responded, “Delayed new house construction, even for replacement houses.”
  • 9.6 percent responded, “Pulled breeders from the field a week or more earlier than planned.”

Forecasting production increases

The chicken industry is continuing a streak of heavy investment in capital improvements for enhancing the capacity to process and package chicken. In 2018, according to WATT Global Media’s annual Top Broiler Companies survey, more than half of the top vertically integrated chicken companies in the U.S. either announced new investments to grow the business or continued work on, or completed, improvements announced in 2017.

With a number of new processing facilities coming online soon, there is a question of whether the domestic and global market can absorb all that additional production or if new processing facilities will replace older ones. According to the survey results, the industry is divided on how this will play out.

Those in the survey group were asked: “A total of seven new broiler processing plants are under construction in the U.S. with the capacity to slaughter 11 million head per week. Please indicate what you think will happen as these plants come online.”

  • 33.3 percent responded, “Between 2 and 4 existing older slaughter facilities will be closed.”
  • 32.1 percent responded, “All existing slaughter plants will continue operating.”
  • 29.8 percent responded, “At least one older slaughter facility will be closed.”
  • 4.8 percent responded, “More than 4 existing slaughter facilities will close.”
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