Declining broiler production and advancing prices are signs the chicken industry is making its way back to profitability in 2012, according to a new report issued by National Chicken Council member CoBank.
Several key events have helped move the industry back to profitability, CoBank said in its report, including the fact that chicken producers have reduced the size of flocks and changed business practices. Chicken production is on track to be at the lowest level in five years by mid-2012. Companies have moved to shorter-term, fixed-price or longer-term, flexible price sales contracts, CoBank said. This new trend is a shift from long-term, fix-price contracts that no longer provide chicken companies with a competitive advantage in this time of commodity volatility. In addition, chicken producers have turned to futures and options contracts to hedge their purchase of inputs, CoBank said.
“The industry is re-defining itself in the wake of extraordinarily financial upheaval and pressures. Many of our customers are feeling cautiously optimistic about their future growth, but that optimism is the result of some very significant changes in the way they operate,” said Amy Gales, executive vice president of CoBank’s regional agribusiness banking group.
