A new report from Rabobank International entitled “This Is Not Your Grandfather’s Chicken Industry” says that the U.S. chicken industry is encountering permanent, rather than cyclical challenges, that will require significant changes in how the industry operates in the future. The factors contributing to these challenges include structurally higher and more volatile feed input costs, that maturation of the U.S. domestic market, and rapid globalization of the industry. This rapid globalization will require U.S. companies to develop new products for export to new export markets, Rabobank said.
In addition to these market challenges, the U.S. chicken industry is facing more and more government regulation, making competitive cost management and efficiency increasingly difficult to achieve, the report said. The U.S. chicken industry is experiencing its second major downturn in just three years and corn prices will not go back to $2.50 per bushel, according to Rabobank. In addition, Russia will be sufficient soon in chicken and will not be a significant importer of U.S. leg quarters and domestic demand has matured as U.S. per capita poultry consumption peaked between 2004 and 2006. All these factors, and more, points to a secular change, not just another cycle, according to the Rabobank report.
Rabobank concludes that the U.S. chicken industry has a favorable future, but structural changes regarding input costs and domestic and international demand, will require a new approach and increased management discipline. Balance sheets need to be strengthened, improvements must be made in risk management, and cost volatility needs to be shifted to industry customers, the report said.
To read Rabobank’s comprehensive report on the significant changes occurring in the U.S. chicken industry, click here.
