Despite record-breaking production levels, the chicken industry is experiencing rising chicken prices due to robust demand and lower-than-expected cold storage inventories. In October, while more chicken was produced than seasonally anticipated, frozen holdings for nearly all lines—with the exceptions of drumsticks and paws—continued to be lower year-over-year (YoY).
Record Production Meets Strong Demand
Total frozen holdings of chicken in October were approximately 70.8 million pounds lower than the 5-year average. Considering that the year-to-date (YTD) total live weight is at the highest value ever recorded and October’s live weights were at record-breaking levels, the low cold storage numbers suggest a continued robust demand for chicken compared to years past. This imbalance between supply and demand is a key factor contributing to rising chicken prices.
Significant Decrease in Whole Bird Inventories
Among the various chicken products, the most dramatic YoY decrease in frozen inventory was for whole birds, which were also 5.2% lower month-over-month (MoM) compared to a 5-year average MoM change of -2.0%. Throughout much of October, processors reported an active demand for WOGs (without giblets) from the retail and cut-up sectors.
Traditionally, pricing for WOGs gradually increases in October before spiking in November for Thanksgiving. This year, however, pricing remained flat throughout October. While demand was strong and helped decrease cold storage MoM, the large harvest numbers played a role in stabilizing prices.
Wing Demand and Storage Dynamics
The second largest YoY decrease among listed items was for wings. Unlike whole birds, there was a 4.2% MoM increase in cold storage compared to a 5-year average decrease of 0.8%. Wing demand is typically robust from August through October due to football season. This year, however, the demand for wings peaked in July and subsequently declined throughout October.
This unexpected drop likely influenced some sellers to freeze excess production in hopes of increased demand later. Despite the unseasonable MoM increase in frozen holdings of wings, there was still a YoY decrease of 15.1%.
In July, cold storage of wings was at the lowest seasonal level in the past 10 years. While inventories have been slowly building since then, they’ve remained well below year-ago levels. A nearly identical scenario unfolded for thigh meat.
Leg Quarters and Export Demand
Robust domestic and export demand for leg quarters throughout much of the fourth quarter finally started to taper at the end of September. This shift influenced increased storage of production in October compared to the previous month. The fluctuation in export demand plays a significant role in the overall market dynamics and contributes to rising chicken prices.
Breast Meat Inventories and Pricing Trends
The least dramatic YoY decrease in cold storage among the listed lines was for the breasts and breast meat category. Demand for these products faltered at the start of October before stabilizing again, following a steep price drop throughout September.
While a decline in demand for breast meat is seasonal for September, this year’s drop was more precipitous than average. Concurrently, there was a significant rise in cold storage inventory from August to September. This likely influenced the slightly lower 2.8% MoM increase in cold storage compared to the 5-year average MoM change of 5.0%. Although production continued to be stored, starting inventories were higher at the beginning of October than they typically are.
Chicken Market Outlook
Overall, despite decreased demand for several lines in October, the market remained relatively robust. This strength helped keep frozen inventories of most lines below their 5-year averages. The combination of strong demand and lower-than-expected cold storage levels suggests that rising chicken prices may persist in the near future.
Industry analysts anticipate that as we approach the holiday season, demand for certain chicken products will increase, potentially driving prices even higher. Producers and retailers should closely monitor these trends to adjust their strategies accordingly.
Conclusion
The chicken industry’s current landscape—marked by record production, robust demand, and low cold storage inventories—is leading to rising chicken prices. Stakeholders across the supply chain should stay informed about these developments to navigate the market effectively.
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