By Danielle Wiener-Bronner, CNN Business
Updated: Wed, 23 Nov 2022 17:03:04 GMT
Source: CNN Business
Over the past year, as some meat prices have fallen, chicken prices have remained stubbornly high. Strong demand, supply issues and even breeding problems with under-performing roosters kept the pressure on. The supply shortage even had some restaurants, like Wingstop, experimenting with less popular items like thighs.
But now conditions are finally easing, paving the way for price declines ahead. In the year through October, not adjusting for seasonal swings, chicken prices had jumped 14.5%, according to data from the Bureau of Labor Statistics.
But in October, prices fell 1.3% from the month before. And promotions and deals are right around the corner.
The poultry industry has been able to work through one of the issues that slashed supply last year — a poor choice of rooster that led to fewer chicks than expected.
In May 2021, poultry giant Tyson explained it was short on chickens because of disappointing results with the type of breeding rooster it had picked.
"We're changing out a male that, quite frankly, we made a bad decision on," Donnie King, then Tyson's chief operating officer and group president of poultry, said at the time. There was an "unexpected decline" in hatchings earlier that year because of the type of roosters it used, King, now the CEO, explained.
Tyson wasn't the only one with the problem, noted Christine McCracken, executive director of animal protein at Rabobank. "If you look across the industry as a whole there were productivity issues that challenged several operators," she said.
Since then, producers "have gone back to a more traditional bird," she said.
Why chicken prices were high
But the roosters don't bear all the blame. Chicken processors were caught off guard by the sudden bounceback in foodservice demand in 2021 after mass restaurant closures in 2020, explained Grady Ferguson, senior research analyst at Gro Intelligence, an agricultural data analytics firm.
The decision to cut supply in 2020 affected flock sizes in 2021 — you can't shrink a chicken flock overnight. Effectively, producers made a bet in 2020 that demand would still be down in 2021, and anticipated that smaller supply would be sufficient, he said.
But in 2021, demand came roaring back. Because of that, chicken producers were "under-supply [and] unable to meet the demand of this unexpectedly white hot, post-isolation demand" for chicken, said Ferguson.
Prices start to fall
With supply and demand in better alignment, wholesale prices have been falling in recent months, and prices in the grocery store have started to follow.
It takes some time for lower wholesale prices to reach consumers.
Partially, that's because of long contracts that protect buyers and sellers from volatility. It's also because wild price swings in the grocery store would be jarring to consumers, so retailers prefer to move prices steadily up or down rather than stick closely to what's happening in the wholesale market.
Still, a decline in wholesale prices eventually leads to a decline in retail prices, which is starting to happen.
The decline marks a welcome turnaround from the higher chicken prices this year, which have added an extra stressor in the grocery store for consumers who have been turning to chicken as a more affordable alternative to beef and other pricy cuts of meat.
Chicken is still cheaper compared to beef or pork when you look at sticker prices, said Jayson Lusk, head of the department of agricultural economics at Purdue University.
"If [consumers are] being pinched, their real spending power is falling, poultry is going to look like a good option." And more grocery stores will likely start to offer more promotions on chicken after the holidays.
This time of year, shoppers typically look for roasts, stew meat, sausage and, of course, turkey. Retailers may offer promotions on such seasonal foods to get customers in the door.
But customers just aren't that interested in chicken, and so it doesn't make sense to offer promotions on the item at the holidays.
But that will likely change early next year, said Rabobank's McCracken, once the holidays have passed and people have made fresh resolutions,
"Everybody shifts back to leaner, healthier meats at the beginning of the year," she said. That means deals are ahead.