Will 2017 Be a Rollercoaster Year for Chicken Prices?

Spend Matters welcomes this guest post from Michael Liberty, market analyst at Mintec. 

As over 100 million viewers tuned in to watch the New England Patriots make the greatest comeback in Super Bowl history, defeating the Atlanta Falcons 34-28 in overtime, they turned to mouthwatering chicken wings for their half-time snack. A record 1.33 billion wings were consumed this Super Bowl, up 2% year-over-year. So, what better time could there be to look at what chicken prices are doing and the factors likely to affect prices this year?

In 2016, U.S. chicken prices were mainly affected by feed costs, which account for between 50-70% of total chicken prices. Chicken prices reached the peak for 2016 in June, up 12% from the start of the year. According to the U.S. Feed Cost Index below, which is a blend of corn (54%), soybean meal (32%) and wheat (14%), feed prices rose 25% during the same period.

This was mainly due to an increase in prices for soybean meal, driven by a decline in production in Argentina for 2015/16 — a result of unfavourable weather conditions. However, chicken prices subsequently fell from the second half of the year in line with the feed costs, due to improved prospects for both soybean meal and maize feed in 2016/17.  

By now you may have assumed that the increase in chicken prices from Q4 2016 was also related to feed, and you would be right to do so. The Feed Cost Index rose approximately 5% in Q4, driven by an increase in prices for maize and soybean meal, due to strong export demand for U.S. supplies and concerns over the impact of delayed planting in Argentina on overall production.

Although feed prices were the only major driver for chicken prices last year, it was clearly a rollercoaster year for chicken prices. It may come as a surprise however that in 2017  feed costs will not be the only major factor affecting prices. For example, chicken production is forecast to increase in the first quarter of this year, driven by a rise in the number of eggs for hatching and slaughter weights.

On the demand side, U.S. chicken exporters are likely to benefit from outbreaks of Avian flu in Europe, due to trade embargoes on poultry exports from affected areas. In addition, South Korea is also experiencing Avian flu outbreaks, which have resulted in the culling of more than 20 million birds in 400 poultry farms from mid-November. As a result, their reliance on imports from the U.S. is expected to increase.

Although strong export demand is expected to be the largest price driver in the short term, political decisions take by President Donald Trump could offset potential increases.  Since his inauguration, President Trump has signed executive orders to authorise a U.S.-Mexico border wall that is likely to ruin relationships with Mexico, which is a major importer of U.S. chicken. Other executive orders also include a notice that the U.S. will begin withdrawing from the Trans-Pacific Partnership trade deal.

It looks like it's going to be another rollercoaster year for chicken prices after all.

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.