Aviagen Broiler Economics. Bear Market part 2: US chicken industry

calendar icon 15 October 2021
clock icon 10 minute read

The US chicken industry, like a lot of industries, was reluctant to expand production last year in the teeth of the COVID-19 recession. In addition, production was constrained by the effects of the disease itself on processing plants. When the economy and meat demand started recovering faster than imagined this year, the supply of chicken turned out to be surprisingly short. All chicken prices rose, especially wing prices. Deboned breast also climbed as sandwich wars broke out between fast food companies that offered new chicken sandwich products this year.

High prices are, of course, the cure for high prices and chicken is no exception. Chicken prices can be expected to moderate over the next year as labor shortages are sorted out and production increases return.

Last year, China opened their market to US chicken and became the second largest market for US chicken after Mexico. The market is not just for paws, which can be worth as much as $2 per pound, but also large amounts of leg quarters. Although exports of leg quarters to China slowed in the last few months as prices rose, exports for the entire year can be expected to at least equal that of last year.

The USDA (August WASDE) expects chicken production to be only 0.3% higher this year. As can be seen on the graph below, chicken production was lower in the first quarter, higher in the second quarter and then is projected to be only slightly higher in every other quarter this year. Next year production is expected to accelerate slightly to a 1.3% gain and surely will increase more rapidly in 2023.

The chick placements graph below, moved 7 weeks forward to show the processing date, indicates that production at this moment is temporarily lower than last year. Going forward over the next month, production will be similar with very little increase over 2020.

After a decline from 2007 to 2013 (the great recession) US consumption of both red meat and poultry per capita rose steadily year after year until 2019. Last year, beef and pork started to fall while chicken consumption leveled out a trend that continues this year and next. As a result, total meat consumption per capita is falling. With supply and therefore consumption falling while demand rises, it is no wonder that prices are high for all meats.

Deboned Breast

The price of deboned breast was on a roller coaster last year. Prices rose during the supermarket hoarding phase, fell due to the fall off in food service, rose when some plants closed and then fell when the plants reopened. At the end of the year, breast meat prices fell to their lowest price. This year, breast meat rose steadily month after month until May thanks in part to new fast food chicken sandwiches and the opening of more food service outlets. Prices are likely to remain relatively high for the rest of the year.

Leg Quarters

Leg quarter prices are highly dependent on the export market. Exports to China fell in the last few months but other countries have taken up the slack. Total exports will be higher this year than last year. If the world shakes off COVID-19, the outlook for exports will be even better. In addition to strong exports, increasing domestic demand for leg quarters, and in particular deboned thigh, is providing a new floor for leg quarter prices. It is possible that the Northeast prices will continue to linger above 40 cents for the rest of the year. The new floor is about $1000 per metric ton. There also appears to be a ceiling of around $1000 per metric ton. International demand falls off above that number.


Nowhere was the collapse of food service demand last year more evident than in the wing market. Suddenly higher unemployment, falling wages, sports being cancelled, and restaurants and bars being closed were a major but temporary blow to wing prices. Wing prices bounced right back and continued higher the rest of last year and all this year so far. Part of the reason for rising prices was lower supply as large bird deboning production dropped. With food service reopening, wings soared to above $3 per pound wholesale (Northeast Price). Although wing prices may have peaked, they are likely to remain high for the rest of the year.

Chicken production in the US is very profitable thanks to high wing, leg quarter and breast meat prices. Prices are likely to remain high this year instead of dropping as they normally would after a seasonal peak in the late spring thanks in part to the high price of competing meats. It appears that the industry will remain highly profitable throughout the year despite high grain prices.

World Chicken Growth Rate

World chicken production grew only 1% last year because of COVID-19. This year, growth will be 1.5% according to the USDA as production lags the recovery in demand. Growth is expected to accelerate to 2% in 2022.

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