It’s safe to count chickens even before they hatch

Pilgrims Pride

31/10/2024 12:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Robert Cyran
       NEW YORK, Oct 30 (Reuters Breakingviews) - Americans are
cock-a-hoop for chicken. McDonald’s  MCD.N  just introduced the
Chicken Big Mac, shares of Wingstop  WING.O  are up 1,100% over
the past decade, the Chick-fil-A chain is rolling out an
entertainment app, and producer profitability has soared. All
the clucking makes it harder to convey a warning about the $50
billion U.S. market for birds bred to eat, but the sky will
fall.
    Capitalism and science have combined to cultivate fowl so
cheap and prevalent that chicken bones have become a notable
part of archeological records. The credit, or blame, belongs
with factory farming. Industrialization may increase the risk of
pandemics, intensify pollution and raise poultry whose tasteless
meat is prone to conditions like “woody breast,” but it also
means chickens that grow to maturity twice as fast, are double
the weight, and about three times as efficient at processing
feed as a century ago.
    The result is lower prices and higher consumption, which has
nearly quadrupled since 1960. 
    Protein-rich diets have nourished Big Chicken. At $11
billion Pilgrim's Pride  PPC.O , which also churns out pork,
revenue is forecast to exceed $18 billion this year, twice as
much as a decade ago, according to estimates collected by LSEG.
    Chicken, however, is a commodity, as prone to wild industry
and economic swings as any other agricultural product. When
times are bad, companies slash output, which leads to shortages.
Prices eventually rise, followed by more factories, new ways to
serve the birds and, apparently, chicken-related mobile apps.
    So-called broilers go from egg to slaughter in just a few
months, so changes can happen much faster than for, say, coffee,
where growing plants takes years. Because chicken consumption is
bound to keep rising, it can be hard to ascertain when booms and
busts will occur.
    In early 2022, for example, Pilgrim's Pride said supply was
constrained by avian influenza, while higher construction and
labor costs dissuaded companies from expanding. Three quarters
later, a glut depressed the company’s adjusted EBITDA margin
from 11.5% to 1.5%.
    Producers today are riding high. Unexpectedly high mortality
rates have constrained supply. Beef prices are near a record
high, thus curbing the competition. Feed costs also have
decreased. Pilgrim's Pride’s profitability jumped to 14.4% in
its most recent quarter, approaching previous peaks, and its
stock price has almost doubled in the past year.
    This boom may last longer than usual. Hurricane Helene
pummeled big chicken-producing areas. Before long, though, it’ll
be time to count the chickens – before they hatch.        
    Follow @rob_cyran on X

    CONTEXT NEWS 
    Pilgrim’s Pride, a producer of poultry and pork, is due to
report its third-quarter financial results on Oct. 31.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Americans keep eating more chicken    https://reut.rs/4e10Q8O
Chickens bred to eat are still getting bigger    https://reut.rs/48mFWzv
Pilgrims Pride's wild poultry ride    https://reut.rs/3AcR5q8
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Jeffrey Goldfarb and Pranav Kiran)
 ((For previous columns by the author, Reuters customers can
click on  CYRAN/ 
robert.cyran@thomsonreuters.com))