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The U.S. poultry industry is dealing with an oversupply of chicken after producers increased supply more than consumer demand, The Wall Street Journal reports.
Companies such as Tyson Foods, Pilgrim’s Pride and Wayne-Sanderson Farms ramped up chicken offerings because they expected consumers to move away from increasingly expensive beef and choose cheaper options, such as chicken sandwiches, tenders, breasts and wings.
However, beef demand has remained strong despite record-high prices, leaving poultry companies with more chicken than the market can absorb. Favorable weather, fewer disease-related losses and the development of larger, faster-growing chicken breeds have also contributed to the increase in supply.
Chicken supplies were about 4.5% higher year over year, and more than 4.9 billion chickens were slaughtered during the first six months of the year, up 3% from the same period a year earlier.
The resulting glut has pushed wholesale prices for boneless, skinless chicken breasts down roughly 37% from a year earlier, putting pressure on producers’ profits. Pilgrim’s Pride, for example, reported a 96% decline in second-quarter profit to $13.4 million.
While the surplus is hurting poultry companies, it is benefiting grocery stores, restaurants and consumers through lower prices. Retail chicken breast prices were down about 1.4% in June, and supermarkets have used cheaper chicken to offer promotions. Restaurants are also adding more chicken items as a way to lower food costs.
In response, companies such as Tyson and Pilgrim’s Pride are focusing more on branded and prepared chicken products, which can help protect profit margins.
The Wall Street Journal has the full story. A subscription may be required.
