The US chicken industry is on a decades-long winning streak. Steady growth in consumer demand coupled with efficiency gains in broiler production have powered the sector’s growth over the last 30 years. However, an emerging set of challenges could put that track record of consistently reliable growth in jeopardy. A slowdown in new processing plant construction — combined with the inherent limitations of existing production systems and an undersupply of chicks — could ultimately hinder processors’ ability to maintain recent growth trends.

According to a new report from CoBank’s Knowledge Exchange, the near-term outlook for broiler production remains exceptionally strong. But the opportunities for increasing output are becoming more limited. Higher capital costs, tight labor availability and increased local regulation have stalled greenfield site expansion. Chick availability has trended downward as genetic priorities have shifted from hatchability to meat yield, and adding more pounds per bird has its limits.

“The potential long-term challenge becomes how big is too big for birds on the processing line, and what will drive consumer preferences for chicken products into 2030 and beyond,” said Brian Earnest, lead animal protein economist with CoBank. “In the short-term, there has been a growing interest in secondary processing or the value-add segment. That’s helping chicken producers meet increased consumer demand for further processed and flavor-enhanced items like tenders, nuggets and sandwiches. But it’s not necessarily a sustainable or long-term approach to consistently increase overall production volume.”

Annual per capita chicken consumption in the US has increased 30 pounds since 1995 and currently stands at 103 pounds, according to USDA data. That number is projected to rise to 107 pounds by 2030, which far exceeds US per-capita consumption of beef and pork. The steady increase in demand led chicken processors to focus on increasing meat yield and efficiency. Broiler genetics companies responded by shifting away from an emphasis on hatchability, or how many chicks a hen could produce, to feed conversion efficiency which promotes larger birds and higher meat yields.

With the change in genetics, producers are now able to achieve more than 1,000 pounds of chicken from a single egg-laying hen. That’s a 17% increase since 2005. While the shift in genetics enabled processors to increase broiler meat yields, those gains have come at a cost. Fewer chicks are available to raise for broiler production. That limits the opportunity to increase production by adding birds into the system. The trend of lower hatchability could be reversed, but it would take several years before genetic changes improve chick availability.

Jumbo birds, value-added products driving current growth and investment

The overall chicken product mix available to consumers today barely resembles what it did 30 years ago. Back then, whole birds and other raw pieces comprised the bulk of consumer purchases. Today, the further processed segment makes up nearly half of all chicken marketed in the US. The jumbo bird format works well with chicken marketing plans that include new product innovations focused on portion-sized convenience and more exciting flavor options in products like strips, nuggets and tenders.

Earnest said the elevated costs associated with new greenfield expansion will limit the addition of meaningful head count in the near future, and short-term growth will be facilitated by larger birds and continued investments further processed capabilities. “Relying on efficiencies in per-bird production will require flexibility and technology. For processors, that means line speed efficiency will be paramount to grow production until such time more birds can be added to meet steady growth in demand,” he said.

Source: CoBank