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CME: McDonald's to Add Chicken Wings to National Menu

29 August 2013

US - The nnouncement by McDonald’s that it would add chicken wings to its national menu on a limited time basis beginning 9 September should be a shot in the arm (pun fully intended!) for the wing market and serve to fuel the fire of expansion in the chicken sector, write Steve Meyer and Len Steiner.

McDonald’s announcement is not a big surprise since its test of the product this past year in Atlanta was rumored to have been a resounding success. According to several press outlets, the product will be sold as a "drumette" or a "wingette" in packs of 3, 5 and 10 pieces starting at $2.99. A variety of sauces will be available.

Chicken wings, of course, are one of the great success stories for product development and innovation. Most credit their original development to the Anchor Bar in Buffalo, NY — hence the name — where in 1964 the owner had, you guessed it, an excess supply of chicken wings on hand. Funny how being up to one’s eyeballs in an item inspires creativity.

As broiler slaughter grew from roughly 4 billion birds in 1980 to over 7 billion in the early 1990s, broiler companies found themselves in the same “up to our eyeballs” predicament that the Anchor Inn experienced. It’s pretty easy to figure that the increase was providing about 6 billion wings that, to say the least, were not the focus of a chicken parts and nuggets and strips-driven foodservice sector. Whole wing prices bounced between $0.50 and $1.00 per pound from 1994 (the earliest data which we have) through 2000.

The "Super Bowl" season of 2001 saw wings eclipse $1.00 per pound and stay there for much of 2001. 2002 saw prices crash all the way to $0.44 per pound in November at which time the trend changed and it has been onward and upward virtually ever since then with the exception of the precipitous decline in 2010 and ‘11. Wings hit all-time record highs this past Super Bowl season but then dropped to just under $1.30 per pound in May before recovering to the $1.60 level this summer.

We had wondered if McDonald’s 2012 pilot product that was likely driven, at least in part, by the 2011 price plunge would ever be successful enough to be attractive in light of record-high 2012 and early 2013 prices. Apparently it is, at least with wings in the $1.50 or $1.60 range. Whole Northeast wings were quoted by USDA yesterday at $159.73/cwt., up about $2 from Friday’s pre-announcement quote of $157.63/cwt.

The news of McDonald’s product addition comes at a time when the broiler sector is beginning to hum. As can be seen below, the number of broiler eggs being placed in incubators has been stable since June, a pattern that actually signals expansion since the normal seasonal pattern for egg sets is down at this time of year. Each of the last two weeks for which we have data (the last being August 16) show year-on-year increases of 4.7 per cent in the number of eggs set. Those figures will not translate into chicken production (including two wings for every bird!) for another eight to ten weeks but the trend is pretty apparent at this point.

These higher sets, of course, follow some steady but modest increases in the broiler hatchery flock this year. Year-on-year growth averaged 1.8 per cent from January through July but jumped to 4.6 per cent as of 1 August. That is the largest year-onyear growth rate for the broiler hatchery flock since July 1999! Broiler companies had been forced to expand slowly through July due to a limited supply of breeder pullets, the result of Mexican companies’ buying large numbers of fertilized eggs this spring to re-stock flocks that had been destroyed due to avian influenza. It appears that that hurdle has been overcome.

The new hurdle, of course, is in fact a familiar one: Feed costs. Our cost model indicates that Monday’s increases in December corn and November soybean meal futures pushed breakeven chicken WOG (without giblet) costs roughly $2.00/cwt. or 2.3 per cent higher. Higher costs may slow broiler expansion a bit but will not stop it.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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