The U.S. chicken industry is poised to set production records by the end of 2017, and based on the upward momentum in egg sets and chick placements, it’s hard to envision 2018 not exhibiting further production gains. The tailwinds within the industry are quite remarkable at the moment. The seasonal, late-summer declines in breast meat prices are occurring as expected, but dark meat prices remain strong, and feed costs continue to hover at 10-year lows. Processing margins have been particularly healthy this year, which understandably justifies further production expansion that will be accomplished with a combination of higher head counts and heavier bird weights in the months ahead. By most any measure, significant production losses have not occurred in nearly five years, which is severely testing the historical durations of a traditional chicken cycle. Are we experiencing a new normal, or is an end to this profitability run in sight?
The most obvious threat to producers over the near-term is entirely political in nature. The mounting tensions associated with North Korea make daily headlines with the most recent threat being major trade restrictions that could curtail dark meat pricing that is traditionally supported by export markets. But the potential for export bans to erase current profitability levels is very low, and the more understated threat to the industry relates to the significant expansion of antibiotic-free (ABF) production that has occurred over the last few years.