Crumbling foodservice demand has sparked an “unprecedented collapse” in boneless chicken breast and wing prices that has compounded as consumers’ initial pantry loading also tapered off, Wall Street analysts said in reports to clients late last week.
A “meteoric drop” in foodservice demand due to the COVID-19 outbreak has driven April boneless breast prices to 40 to 60 cents per pound, after a surge above $1 per pound near the end of March. Production cuts have begun, but are likely not enough to stem the tide until foodservice demand stabilizes or exports pick up, given abundant domestic chicken supplies.
Some Farms plan to slow production over the coming months and is shifting their tray pack chicken mix by 2.2% vs. big bird output, but better tray pack margins will be partially offset by Saturday overtime pay and $9.5 million in employee attendance bonuses.
Farmers view capacity rationalization in the chicken industry as the primary reason for owning the stock on a 12-month basis rather than acceleration of protein exports from African swine fever and stronger domestic demand. We expect smaller chicken processors to follow this lead by cutting back eggs in their internal operation.
The analyst lowered 2020 earnings estimates for one processor to $5.60 a share from $5.90 and his 2021 forecast to $6.27 a share from $6.90. For another, they reduced their earnings target to negative $1.34 per share from up $1.00 and 2021 outlook to $9.50 per share from $10.00.
A one-day, 8-cent drop in boneless, skinless breast prices, was “by far the biggest we can recall on any day in the last 15 years. And the 22-cent-per-pound decline over roughly the past two weeks was the steepest in any similar timeframe since 2014.
Source: meatingplace.com; 4-6-2020