Industry bets Americans can eat more chicken

bigger birds and more of them. Americans have been eating more chicken than any other meat for two decades, but demand has taken off in recent years. Per-capita consumption will jump to a record 92.4 pounds (42 kilograms) this year, up 15 per cent since 2012, U.S. Department of Agriculture data show.

Tyson, which also produces beef and pork, had record earnings in the fiscal year ending Sept. 30. On Thursday, the Springdale, Ark.based company reported profit for the three months through the end of December was US$541 million, or $1.50 a share, according to the average of seven analysts’ estimates compiled by Bloomberg. bigger birds, USDA data show.

Most of the processing expansions will be completed beginning next year. Sanderson, which has added seven plants since 1993 and has been more aggressive about adding capacity, recently broke ground in eastern Texas. Tyson, the biggest producer, plans to build its first new chicken plant in two decades, opening in 2019 in western Tennessee. Costco says its US$300-million plant in Nebraska will produce almost 100 million chickens a year, supplying about a quarter of what its stores need and reducing costs by 10 cents to 35 cents a bird.

The pace of planned expansions has some analysts concerned. Shares for Tyson, Pilgrim’s and Sanderson have fallen since mid-December. Frozen chicken supplies are at a 12-year seasonal high, and the USDA forecasts broiler prices to slip about 3.2 per cent in 2018 to average US90.5 cents a pound. The agency on Wednesday also forecast domestic farm income will fall to a 12-year low as prices drop and costs increase.

“There may be more expansion than we had initially thought,” Heather Jones, an analyst at Vertical Group, said in a Feb. 5 report. In a separate interview, Jones said that while the production increases will be absorbed by the market, “margins will be compressed.”

The outlook also could be tripped up by lawsuits filed by chicken buyers accusing producers of illegally conspiring to raise prices and any disruption in trade deals that have helped fuel U.S. exports.

Still, some older plants may be closed as more-efficient facilities are built, and not all the new capacity may get used if market conditions deteriorate, said Christine McCracken, an animal-protein analyst at Rabobank.

Some producers have no choice but to add capacity if they hope to meet growing demand, because efforts to make birds bigger may erode the texture and appeal of the meat. Others need new facilities to address the changing tastes of consumers.