2022 Outlook for Poultry Prices

Introduction

Wholesale chicken breast prices are at $2.70 a pound, their highest level since at least 2000, when Gro’s records began. In 2021, broiler chicken prices rose 38% over the previous year, and producers’ margins soared. 

Usually, when chicken producers’ margins are strong, chicken buyers and broader market participants can expect prices to begin to decline about six months later. But elevated food prices worldwide are now overwhelming the influence of last year’s high margins. 

Ahead of the summer grilling season, here are the major forces that will be driving year-over-year poultry price changes.

1. New US Bird Flu Outbreak

A strain of highly pathogenic avian influenza (HPAI), first reported in the US on February 8, has now been reported at commercial poultry farms in eight US states and affected nearly 8 million chickens and turkeys. A further acceleration of HPAI case counts and depopulation totals in the coming weeks could cause domestic chicken prices to jump. 

For now, US wholesale chicken prices reflect only a small bird flu premium. In the last major US bird flu outbreak, which occurred between December 2014 and June 2015, prices of some domestically oriented broiler cuts shot up within six weeks of the first discovery. 

2. Last Year’s Strong Producer Margins 

As recently as November, when broiler chicken margins were 4 cents per pound above their 10-year average, broiler chicken margins were pointing to a 10,000-tonne-a-month increase in production that would have led to the beginning of a decline in chicken prices this year, according to Gro’s Broiler Chicken Margin Monitor. 

Our Broiler Chicken Margin Monitor provides users with a comprehensive view of industry profitability and the likelihood of future changes in broiler chicken prices and supplies, showing the direction of prices up to 19 months in advance of price movements. 

In June 2021, for example, the Broiler Chicken Margin Monitor showed the monthly average US margin at 19 cents per pound of ready-to-cook chicken, 10 cents higher than the 10-year average.

3. Higher Food Prices Are Fueling Elevated Chicken Prices

High levels of food price inflation worldwide are overwhelming last year’s strong margins, and due to elevated global inflation, prices are likely to remain high into the summer. 

A broad acceleration of food price inflation has been underway in the US since May 2020, shortly after COVID lockdowns started. As pandemic-related restrictions have eased, pent up consumer demand has pushed prices higher, while labor and material shortages have restricted production. 

Across the US economy, prices of goods and services have been rising at quadruple the US Federal Reserve’s 2% target, and US food price inflation has soared to its highest level in a decade. For example, Gro’s US Food Price Index, which reflects prices based on the consumption of a wide range of food items, is currently up 30% year-over-year.

Also, the world must now confront the possibility that major export disruptions from two of the world’s biggest agricultural producers, Russia and Ukraine, will push global prices higher still.

4. Higher Feed Prices Are Driving Up Chicken Prices

Droughts in Brazil, Canada, and the US, along with unprecedented demand from China, have tightened global supplies of grains and oilseeds, leading to sharply higher animal feed costs and, in turn, higher chicken prices.

This year, as South American crop prospects deteriorated due to drought, corn futures prices rose 5.5%, marking a 35% year-over-year increase, and soybean prices shot up 17%, a 38% increase compared with last year.

The conflict between Russia and Ukraine could also nudge producers’ feed costs - and, by extension, poultry prices - higher. Russia contributes 17% of world corn exports and 76% of global sunflower supplies. Russia is also one of the biggest exporters of the three major groups of fertilizers (nitrogen, phosphorus, and potassium), a key input in corn production. 

US farmers are likely to respond to the crop price shocks triggered by the Russian-Ukrainian war by increasing corn acres.

5. Beef and Pork Are Impacting Chicken Prices 

Meat and poultry are among the biggest drivers of US food price inflation, and across the board, prices for proteins are elevated and on the rise. 

Wholesale US beef prices rose 25% in 2021, due mostly to COVID vaccinations and the easing of pandemic-related restrictions. In the first two months of 2022, wholesale beef prices climbed an additional 21% compared with the same period last year because COVID-related labor and supply chain issues reduced productive capacity.  

Meanwhile, at 92 cents a pound, pork prices during 2021 were up 45% from the year prior. US pork stocks began 2022 at the lowest level of any New Year’s Day since 1997, falling to 21% below the seasonally adjusted five-year average by the end of January. Partly because boneless hams require more labor to remove the bone, they were in even tighter supply at 31% below average. 

Conclusion

Rising feed prices and protein industry prices are fueling a steady increase in year-over-year chicken price changes. These forces, coupled with the highest level of food price inflation in a decade, mean that chicken prices will probably remain elevated into the summer, despite following a year of strong producer margins. 

As the summer grilling season approaches, chicken buyers should watch the Broiler Chicken Margin Monitor to forecast fluctuations in price so that they can better time their purchases.