A Glut Of Chicken

[Mike]

NEW YORK (CNNMoney) -- The United States is stepping in to help bail out another American industry -- chicken farmers and meat processors.

The nation's chicken industry is having a difficult year. Chicken producers are struggling with higher costs of running their business at the same time that consumers are buying less meat.

This has created a glut of chicken products in the market.

Total chicken production in the first half of 2011 rose 4% compared to the same period a year ago, while demand for chicken has cooled, according to the National Chicken Council.

Consequently, retail prices for chicken product have dipped.

The Department of Agriculture, keenly aware of these issues, announced Monday that it will make a special purchase of up to $40 million of chicken products, which the government will then donate to federal food assistance programs such as soup kitchens and its national Feeding America programs.

The USDA steps in occasionally to buy up food products that are in surplus supply in the market. By doing this, it helps shrink the glut of product, raise retail prices and support producers that are struggling to cover their cost of production.

With Monday's chicken order, the USDA said it hoped the move would also provide support to the broiler industry and many small poultry [producers]. Broilers are chickens grown for meat as opposed to egg laying.

"Broiler producers have already cut production substantially and this purchase will help them bring supply in line with demand," the agency said.

The government made a similar move with a $30 million purchases of chicken products last year and a $42 million purchase of chicken products on 2008 with the intention of stabilizing retail prices.

The USDA said funding for the special purchases comes from customs receipts.

For its part, the National Chicken Council welcomed the bail out.

"At a time when the industry is under great stress due to the high cost of feed ingredients and the general economic slowdown, we appreciate USDA's willingness to step forward," the group said in a statement.

Bill Roenigk, economist with the National Chicken Council, said chicken producers have been hit with a double whammy.

First, high grain prices have significantly raised production costs for producers. Second, a difficult economy has changed how people shop for food and also what groceries they buy.

Many budget-conscious household aren't buying chicken even though an excess supply of chicken products is keeping retail prices for chicken below last year's levels, he said.


In June, the average store price for a pound of boneless chicken legs was $1.45, down 2.6% from last year, and $3.12 for a pound of boneless chicken breast, also down 5.9% from a year ago, according to government data.

"Many of our producers are selling whole chickens at wholesale prices that don't even cover their cost of production," Roenigk said. "We've lost three or four companies already this year because of it."

Every year, the industry sells about $45 billion worth of poultry meat. "We're expecting that total to be down 5% to 6% this year," he said.

The USDA's July report on poultry outlook seems to support Roenigk's assessment.

The agency, blaming higher grain prices and a difficult economy, expects broiler meat production in the second-half of 2011 to fall below last year's level and also anticipates broiler meat production to slow down in 2012.

Roenigk hopes the latest government assistance quickly stabilizes prices for poultry producers.

While that would be a good thing for producers, it could happen at the expense of consumers since reducing supply tends to raise retail prices for the product.

Retailers typically shy away from raising product prices. So Roenigk suspects stores will try to couch any prices increases. "You could see retailers offering discounts and specials on chicken less often than they have been," he said.


First Published: August 16, 2011: 4:17 PM ET

 

[Tex]

NEW YORK (CNNMoney) -- The United States is stepping in to help bail out another American industry -- chicken farmers and meat processors.

The nation's chicken industry is having a difficult year. Chicken producers are struggling with higher costs of running their business at the same time that consumers are buying less meat.

This has created a glut of chicken products in the market.

Total chicken production in the first half of 2011 rose 4% compared to the same period a year ago, while demand for chicken has cooled, according to the National Chicken Council.

Consequently, retail prices for chicken product have dipped.

The Department of Agriculture, keenly aware of these issues, announced Monday that it will make a special purchase of up to $40 million of chicken products, which the government will then donate to federal food assistance programs such as soup kitchens and its national Feeding America programs.

The USDA steps in occasionally to buy up food products that are in surplus supply in the market. By doing this, it helps shrink the glut of product, raise retail prices and support producers that are struggling to cover their cost of production.

With Monday's chicken order, the USDA said it hoped the move would also provide support to the broiler industry and many small poultry [producers]. Broilers are chickens grown for meat as opposed to egg laying.

"Broiler producers have already cut production substantially and this purchase will help them bring supply in line with demand," the agency said.

The government made a similar move with a $30 million purchases of chicken products last year and a $42 million purchase of chicken products on 2008 with the intention of stabilizing retail prices.

The USDA said funding for the special purchases comes from customs receipts.

For its part, the National Chicken Council welcomed the bail out.

"At a time when the industry is under great stress due to the high cost of feed ingredients and the general economic slowdown, we appreciate USDA's willingness to step forward," the group said in a statement.

Bill Roenigk, economist with the National Chicken Council, said chicken producers have been hit with a double whammy.

First, high grain prices have significantly raised production costs for producers. Second, a difficult economy has changed how people shop for food and also what groceries they buy.

Many budget-conscious household aren't buying chicken even though an excess supply of chicken products is keeping retail prices for chicken below last year's levels, he said.


In June, the average store price for a pound of boneless chicken legs was $1.45, down 2.6% from last year, and $3.12 for a pound of boneless chicken breast, also down 5.9% from a year ago, according to government data.

"Many of our producers are selling whole chickens at wholesale prices that don't even cover their cost of production," Roenigk said. "We've lost three or four companies already this year because of it."

Every year, the industry sells about $45 billion worth of poultry meat. "We're expecting that total to be down 5% to 6% this year," he said.

The USDA's July report on poultry outlook seems to support Roenigk's assessment.

The agency, blaming higher grain prices and a difficult economy, expects broiler meat production in the second-half of 2011 to fall below last year's level and also anticipates broiler meat production to slow down in 2012.

Roenigk hopes the latest government assistance quickly stabilizes prices for poultry producers.

While that would be a good thing for producers, it could happen at the expense of consumers since reducing supply tends to raise retail prices for the product.

Retailers typically shy away from raising product prices. So Roenigk suspects stores will try to couch any prices increases. "You could see retailers offering discounts and specials on chicken less often than they have been," he said.


First Published: August 16, 2011: 4:17 PM ET

The underlying economics in the poultry biz and the inability of the U.S. government to enforce the rules of the market create continual over supply in the poultry markets.

It is what the big companies use to push the little ones out and concentrate the markets as well as steal demand from beef through low prices.

I don't see why the USDA would support this drug habit in any way. Buying food for their programs is one thing but buying oversupply to manipulate prices up is government intervention that encourages overproduction.

The industry is becoming more and more consolidated as the govt. twiddles it thumbs on enforcing the market rules.

Too big to fail or having too much economic power for politicians to allow to fail is what will put the American Taxpayer on the hook again.

When will our government learn? We have been through all this before and we have the rules that we need to prevent this from happening but they are not being enforced. Instead we coddle those breaking these laws and prop them up.

There needs to be some accountability here instead of pandering.

Tex

 

[Sandhusker]

Cash for Cluckers?

 

[Kato]

You guys need a chicken marketing board. :wink: Chicken breasts here are over $7.50 a pound, and nobody has ever had to bail out a chicken farmer. As a bonus, expensive chicken is not nearly as hard on beef demand as cheap chicken is. 8)

 

[Tex]

You guys need a chicken marketing board. :wink: Chicken breasts here are over $7.50 a pound, and nobody has ever had to bail out a chicken farmer. As a bonus, expensive chicken is not nearly as hard on beef demand as cheap chicken is. 8)

Now you know the secret, Kato. It is the poultry industry swallowing up the beef industry and they have left a lot of skeletons behind.

How any beef person can get in bed with them is beyond me. They know not what they do.

Tex

 

[Sandhusker]

You guys need a chicken marketing board. :wink: Chicken breasts here are over $7.50 a pound, and nobody has ever had to bail out a chicken farmer. As a bonus, expensive chicken is not nearly as hard on beef demand as cheap chicken is. 8)

Now you know the secret, Kato. It is the poultry industry swallowing up the beef industry and they have left a lot of skeletons behind.

How any beef person can get in bed with them is beyond me. They know not what they do.

Tex

Yep

 

[Kato]

For that matter, with our milk marketing boards, we don't have those occasional "milk cow culls" to glut the market with cheap burger either. I think Canadian beef producers need to get behind the marketing boards and make sure they don't get dismantled. It seems they save us a lot of grief, just by existing.