Chicken Sandwich Craze and Swine Fever to Boost 2020 Poultry Demand
Chicken Sandwich Craze and Swine Fever to Boost 2020 Poultry Demand
(Bloomberg) -- The U.S. chicken market is leaving a period of oversupply and low prices in the rear-view mirror, according to major supplier Sanderson Farms Inc.
Since November, poultry prices have been ticking up from record lows of the past two years -- the opposite of what usually happens at this time of year. Along with positive trade news for chicken out of China and a new-found poultry popularity in U.S. restaurants, 2020 is shaping up to be a winning year for American producers.
“The protein deficit caused by African swine fever in China and other countries, recently well-publicized chicken sandwich features at quick serve restaurants, and expected higher retail pork and beef prices should all support stronger poultry markets as we move into 2020,” Chief Executive Officer Joe Sanderson said Thursday in a statement.
China recently opened its doors to American poultry for the first time since 2015 to help fill a protein shortfall caused by swine fever. On a call with analysts Thursday, Sanderson said he expected to sell 87 million pounds of chicken feet a year to the Asian nation, with a benefit to operating income of $71 million. The company already sent its first delivery of so-called paws to China this month. He said he expected a trade agreement in January to lift tariffs, helping profits even more.
While boneless breast meat prices fell 3.4% in fiscal 2019, wholesale jumbo wing prices were up 20% and leg quarters, a commonly exported item, rose 1.3%.
Sanderson said its feed costs were flat, with slightly higher grain prices offset by improved bird performance. In 2020 feed costs will remain benign amid ample worldwide supplies, executives said during the call with analysts. The company has its corn needs priced through December and soymeal priced through March.
Sanderson’s quarterly sales and earnings were slightly ahead of estimates, with an adjusted loss narrowing from a year earlier. The company’s shares jumped as much as 7.4% to a record on Thursday. They’re up almost 80% this year on expectations that Asia’s pork shortages will boost demand for American chicken.
“Sanderson Farms continues to be well positioned to show significantly improved results in 2020,” Stephens Inc. analysts said in a Dec. 5 report. “We continue to maintain a constructive view on chicken and we are encouraged by recent movements in breast meat and leg quarter pricing.”
--With assistance from Isis Almeida.
To contact the reporter on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net
To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net
©2019 Bloomberg L.P.