2015 Poultry Report: Pep in poultry’s step
The poultry industry certainly won’t be boring in the new year, thanks to a number of opportunities, changes and challenges that lie ahead.
In many ways, 2014 was a year that the stars aligned for the poultry industry. A bountiful harvest meant grain prices dropped from record highs, reducing one of the biggest costs of any poultry producer. The prices of red meat rose sharply, causing many American consumers to put beef and pork back on the shelf and turn to chicken or turkey. The per-capita consumption of poultry in 2014 was estimated at just over 100 pounds, according to the most recent USDA estimates — the first time since 2011 that consumption was recorded in the triple digits.
Then there were the headline stories — mostly on the negative side. Consumer media has repeatedly attacked the industry for the amount of pathogens on carcasses or the amount of antibiotics used in the production of poultry. One of the more recent reports warned British consumers about the prevalence of Campylobacter on fresh chicken, blamed in part on harmful industry practices. Domestically, a chicken farmer allowed an animal-rights group to videotape the poor conditions of his flock. Despite the fact that many of the poor conditions were easily preventable, the farmer was hailed by some as a hero for exposing —once again —harmful industry practices.
Such is the state of the poultry industry — just when the battles for profitability and best business practices seem to be succeeding, the battle over public perception takes several losses. While the industry is making strides in strengthening the business, the fight over public opinion cannot be forgotten.
From a business standpoint at least, 2015 is shaping up to be another strong year, says Heather Jones, managing director, Food & Agribusiness Group, for BB&TCM Equity Research.
“Broadly, we believe margins on a per-pound basis will not be as robust as in 2014, but will still be very strong,” she says. “That said, some sub-segments of the market, particularly small bird and those heavily exposed to retail, could feasibly generate profits similar to 2014. Key factors we have considered are a strong demand environment and our belief that supply growth will exceed 4 percent in 2015.”
Some of the factors that played to the poultry industry’s advantage last year will return this year, though possibly not to the same extent. Jones predicts that full-year feed costs should be lower than in 2014, but that outlook has not been as favorable as it was a few months ago due to less favorable growing conditions in key grain-producing regions around the world. Additionally, the protein content of the 2014 soy crop was less than expected, negatively impacting the outlook as well. Beef prices are also expected to grow, though not as substantially as they did in 2014, while higher pork production should result in lower prices for that protein.
At the foodservice level, red meat portion sizes have been scaled back as an attempt to make beef and pork dishes more reasonably priced, but consumers still have looked for alternative types of meat, says Chef Tom Schneller, associate professor at the Culinary Institute of America. That trend favors the poultry market, and restaurants are now seeking out ways to make their chicken and turkey offerings stand out from the pack.
“You see normal fast-food restaurants improving their choices, so the more upscale restaurants are looking to differentiate themselves from that,” he explains. “I see some places looking for alternative types of meats, even in the poultry world. They’re looking for antibiotic-free, and even some breed-specific items at the very high end.”
Breed-specific products have become common among beef and pork entrees, but it is still more of a niche market in the poultry sector. However, as long as there are chefs looking to feature a blue foot chicken, for instance, there will be companies to meet that need.
The need to stand out is making chefs more creative than ever. Schneller notes that some chefs are taking a hairline chicken breast, slicing it open, stuffing it with their choice of ingredients, and then sealing it with transglutaminase, commonly known as “meat glue.” The resulting entrée is a near-perfect seal that a chef can’t get with just a toothpick or breading. They’re also getting creative with duck, a traditional favorite at upscale restaurants.
“Chefs will take a duck breast, cure it, season the outside a little bit and smoke it, and then they cut it thin like a pastrami,” Schneller says. “It’s got a good flavor.”
Beefing up turkey demand
Cooper Farms, like many others in the turkey industry, operated with all cylinders firing in 2014, reports Gary Cooper, chief operating officer of the Ohio-based company. Along with a successful pork operation, the company has plans to expand its turkey division as well as its egg-laying division this year. While he works on making Cooper Farms even more successful in 2015, he also is working on a long-term plan to benefit the turkey industry as a whole.
As the chairman for the National Turkey Federation, Cooper came up with the goal of increasing demand for turkey in the United States. For about the last 25 years, turkey consumption has remained relatively flat — somewhere between 16 to 18 pounds per capita, according to the USDA data. Estimates for 2014 and 2015 even have that number dropping below 16 pounds.
The concept is something that has been tried in the past, but never with great success. With the other protein groups utilizing their own programs to boost demand, the turkey industry had to do something.
“When I saw my chairmanship coming up, I thought about what we might to that would work better than what we’ve done in the past as an industry,” Cooper says. “We came up with the idea that in the past, we had focused mostly at the consumer level. We just don’t have that kind of money to hit that many people with the message.
“We also believe that people already like turkey,” he adds. “They already believe that it’s a super-healthy protein, so it’s not like we have to convince people of that. We have to get the protein into their restaurants or their kitchens or grocery stores more than what we have had in the past.”
Cooper’s idea was for a five-year plan that would increase the consumption of pounds per person to 20 pounds by 2020 — a lofty goal, and one that has never previously been reached. Of course, the goal is more than just increasing the quantity of turkey consumed, which could be done by cutting prices. The goal is to boost demand while keeping market prices at a profitable level, thereby helping every company in the turkey industry.
Cooper’s idea included the notion of “co-ompetition,” or a merging of competition and cooperation, as he gathered about 35 industry professionals, called the Turkey Development Enhancement Team (TDET), who volunteered to help determine the best approach.
“The concept is that as an industry, when we get together, we put on the industry hat and are cooperating, and then when we get back to our individual companies we put on our company hat and are competing, which is fine,” Cooper says.
After a series of meetings and conference calls, the group came up with about 125 different strategies or projects, most of which fell under the scope of either foodservice, retail or export. With the help of communications groups and research projects, objectives and strategies were developed. After all the advance work, the NTF approved a three-year plan with the provision that Cooper oversee the project even after his chairmanship expires this year.
From that 35-member TDET, a 10-member Turkey Demand Oversight Team (TDOT) was put in charge of steering the expenditures and monitoring the metrics, starting this month. One of the first assignments is to develop a new, contemporary message for the turkey industry that can be tailored appropriately to the retail, foodservice and export markets.
“For example, on the foodservice side,” he explains, “a lot of the focus is going to be around chefs and culinary schools, and the menu managers of the major restaurant chains, to determine why turkey is not on more menus and on more places on the menus. There are a lot of traditional turkey dishes — roast turkey, turkey burgers, turkey sandwiches — and those are great; we don’t want to throw them out. We want to add to them.”
Similarly, the retail focus will be not on the consumer but rather the meat managers of grocery stores and dieticians — in other words, the people who influence consumers. Those efforts could help expand the number of turkey SKUs in a supermarket from 15 to, say, 30, which could have a much more significant impact than one centered around getting consumers to buy more ground turkey.
One of the problems in the turkey industry has been a lack of convenient items, Cooper says. In that regard, the chicken industry has led the way in the poultry market.
“They slice their chicken, they dice their chicken, they have frozen portion control, ready-to-eat and all kinds of breaded chicken products,” Cooper says. “Our turkey industry is starting to do that, but we as an industry need to speed it up to compete properly.”
Researching for a better industry
Along with the opportunities to increase demand and latch on to hot culinary trends, the poultry industry will also have to deal with its share of challenges in the coming year — as always. Fortunately, the method that has kept the industry moving forward — research, solutions, implementation — continues to be successful, even as new issues arise.
The Food Safety and Inspection Service (FSIS) has for several years focused on reducing the amount of Salmonellaon poultry carcasses and has set performance standards for the industry to meet. When those standards were met, they were lowered again. The net result is there is much less Salmonellaon fresh carcasses than there was 10 years ago.
“Now the next thing the FSIS is focused on is reducing the levels of Salmonella on parts, once you cut up the birds,” explains Dr. John Glisson, director for Research for the Harold E. Ford Foundation, part of the U.S. Poultry & Egg Association Foundation.
Part of the mission of USPOULTRY, Glisson explains, is to help fund the research that provides the information and data that allows the poultry industry to respond with innovation. Some of the research has shown good promise already. The challenge with reducing Salmonellain poultry parts is that there are several processes involved in deboning the carcass, and some of those processes are manual, while others are mechanical. Reducing Salmonellaon whole carcasses, which is a relatively simpler task, was only achieved after years of research, fine-tuning and figuring out how to take what worked in the lab and apply it to an operation that processes a million birds a week.
“I think the public in general thinks that we know how to get rid of Salmonella, but that we’re either too evil or too lazy,” Glisson says of the disconnect between the industry and the general public. “We don’t know how to get rid of Salmonellain poultry parts. If the processors knew what to do, they would have already done it. The purpose of the research is to learn what steps we can take in this complex set of processes that occur to reduce or hopefully eliminate it.”
The issue of bird welfare has also come up, particularly in light of the recent video release. USPOULTRY-funded research is examining the ideal density in a chicken or turkey house, from both a welfare and a profitability standpoint. Another study is looking at the micro-environment of a chicken trailer that hauls the birds to the slaughterhouse.
“How can we learn to provide a better environment in the trailer for the birds as they’re being transported,” Glisson asks. “We would like to figure out a better way to do that, to have better control of the temperature, humidity and wind chill on those birds.”
Another welfare issue that stemmed from the chicken farmer video was the complaint that the chickens are kept in the barn for their entire lives, never having the chance to run around outside. That comes across as unnecessarily cruel to some consumers, but the recent outbreak of avian influenza in British Columbia poultry farms shows that outdoor birds are at high risk of disease. The turkeys and chickens in those farms likely caught the disease from migrating birds, and once detected, authorities were forced to euthanize the flocks. The best solution to protect other flocks, then, is to keep them in chicken houses, where they have suitable lighting and are protected from exposure to avian influenza.
One of the biggest changes that the poultry industry will face over the next few years is the FDA mandate that will ban the use of antibiotics for growth promotion at the end of 2016. Glisson points out that the mandate was supported by the poultry industry, and while the mandate is in the voluntary phase, several chicken processors have already stopped the practice.
Glisson explains that the growth promotion claims were added by pharmaceutical companies after it was shown that birds treated with the antibiotics in low levels did grow better. Eventually it was discovered that the antibiotics were preventing low-level intestinal diseases caused by the bacteria Clostridium.Those diseases are likely to make a comeback once the antibiotic treatments cease.
Raising flocks of chickens for an antibiotic-free program doesn’t mean that birds won’t get sick. When the inevitable illnesses happen, growers will still be able to treat the flocks with antibiotics for therapeutic use, but that will make them ineligible to be branded as antibiotic-free.
“The companies that have antibiotic-free products as a branded line, they also have another brand that you probably don’t hear about,” Glisson points out. “Those are the flocks that needed to be treated, and they are sold under a different name.
“The downside of antibiotic-free is that you’re going to have sick chickens, which to me is a welfare issue,” he adds. “It’s always more complicated than what people think.”
Solving the latest batch of industry challenges isn’t something that can be accomplished overnight. However, the industry does have a good track record of resolving its problems. Along with the decrease in Salmonella on fresh carcasses, the incidence of the pathogen in table eggs has been greatly reduced. That achievement came about as a result of 20 years’ worth of research and incremental progress, Glisson says.
“What I always tell people is that as long as we’re always going in the right direction, we’ll get to the right place,” he adds.