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Published on 05/06/96

Expert Expects Poultry Prices to Rise

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."

Experts/Sources:
Stan Savage
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