Imagine a grocery store where people pay you to buy their
products.
Whether the processors like it or shoppers even know it,
that’s been true in the
poultry section.
"Poultry companies are basically paying their customers
2 cents per pound to buy
chicken," said Stan Savage, a poultry scientist with the
University of Georgia
Extension Service.
Soon, though, that has to change. "They’re going to have
to pass their increasing
costs on to consumers," Savage said.
Though regular prices vary for different poultry cuts, the
increase should affect them
all equally. Savage said even with price increases, this fact
remains the same: the more
processing the company does, the higher the retail cost per
pound.
Only about 10 percent of all U.S.-grown chickens are sold as
whole birds. Processors
further prepare the rest into pieces or filets. Some is even
further processed into
nuggets or patties.
Savage said restaurants and institutions buy most of the
chicken sold in the United
States.
"And restaurant operators are willing to pay the
additional costs for the company
to do part of the preparation for them," he said.
Consumers may not be happy to pay higher prices at the
grocery store. But they may not
notice the price increase when they eat out.
Studies show more families eat out more often than ever, and
they’re looking for
lighter fare. Chicken is often featured in "light"
menu items and remains a
popular choice for restaurant diners.
Most menu items and specialty poultry products are made from
white meat, "which is
fine," Savage said. "The export market for dark meat
is strong, so processors
can sell that part of the chicken abroad."
As long as both the U.S. and international demand remain
high, poultry processors will
keep expanding and raising more chickens.
So why are retail prices increasing?
In short, because feed costs are increasing.
Farmers keep broilers in their houses from 40 to 56 days.
They call that time
"grow-out" and it varies depending on which company
the farmer grows chickens
for.
An average broiler weighs four to six pounds at grow-out and
ate from seven to 13
pounds of feed.
In the past three months, the cost to raise and process a
broiler has gone up nearly
3.5 cents per pound of live bird.
"We’ve seen farmers’ feed costs increase by $30 to $35
per ton just since
February," he said.
Processing and shipping adds another nearly 2 cents per
pound. By the time that broiler
gets to the grocery store, the total cost to get it there and
ready to cook has gone up
about 5 cents per pound.
"These processors can’t keep giving away their chickens
at a loss," Savage
said.
To keep losses to a minimum, Savage said growers are cutting
back on production by 4
percent to 8 percent. He said it takes about 12 weeks for supply
reductions to show up at
the retail level. As supplies get tighter, prices increase.
Cutting back on production means farmers produce fewer birds.
In the broiler industry,
that usually means a longer time between flocks in grower
houses.
For now, Savage expects higher retail costs will very closely
relate to feed costs for
broiler farmers. "Nearly as soon as feed costs for broiler
farmers drop," he
said, "I expect retail poultry prices will, too."
