Are Chicken Prices About to Spring Higher?
When Hurricane Florence made landfall earlier this month, news outlets feared it would leave behind death and destruction.
But while most people have (understandably) been focused on the storm’s impact on humans, few have considered another consequence of the hurricane…
Its effect on the region’s agriculture.
Most U.S. poultry production takes place in the southern and mid-Atlantic states, which is why the impact of Hurricane Florence has been a big concern for the industry.
And among the states most affected by Florence, North Carolina was the hardest hit.
The ripples from this wallop could potentially be felt in consumers’ pockets.
That’s because poultry is the state’s largest agricultural staple.
And the industry’s impact on the Tar Heel State’s economy is approximately $37 billion, according to the North Carolina Poultry Federation.
North Carolina is no molehill here. It’s the fourth-largest poultry producer in the U.S. and home to poultry farms of many household-name producers.
A storm causing flooding in a region packed with notoriously flightless birds isn’t a scenario to be ignored.
For instance, Sanderson Farms (Nasdaq: SAFM) – the third-largest U.S. poultry producer – reported 1.7 million of its broiler chickens died due to Florence.
That’s about 9% of its total poultry inventory.
Another 6 million chickens have been isolated by floodwaters, which could lead to even more deaths.
Meanwhile, the North Carolina Department of Agriculture and Consumer Services also estimates 3.4 million chickens and turkeys have died because of the storm.
Given those numbers, half of the birds killed belonged to just Sanderson Farms.
Putting the damage into perspective, that’s twice the number of birds that died from Hurricane Matthew in 2016.
And those numbers could potentially tick higher.
Now, given the short-term supply shortfall, some news outlets are already pushing the narrative that poultry and even pork prices will see a significant short-term spike.
But I don’t buy it..
First, poultry prices fluctuate on a cyclical basis. They tend to decline in the second half of the year and hit a seasonal low during the fourth quarter.
We’re already seeing prices replicate this historic trend, despite Florence’s impact.
Second, the country is awash in chicken. There’s a glut. Just as we’ve seen with crude.
On a national scale, we’re producing more chicken than ever before. Just last year, more than 8 billion chickens were produced.
North Carolina alone raised more than 830 million broiler chickens.
So a few million lost in live inventory is really a drop in the bucket… as sad as that may seem.
Even recently, weekly broiler slaughter of young chickens, hens and ducks was reported at 164.8 million, according to the USDA’s most recent market news report.
That’s only 4 million shy of the number slaughtered the same week one year ago, giving even less credence to the idea that a big price spike is underway.
And what about hogs?
Well, the USDA reports hog inventories quarterly. But its second quarter report showed that hog inventory hit 73.5 million.
And inventories for North Carolina alone sit at about 8 million.
But only about 5,500 hogs have been reported killed due to Florence.
Plus, pork is yet another commodity that goes through seasonal dips this time of year.
And with such small losses in inventory, there’s no case to be made for a Florence-related price spike for pork either.
So don’t worry about your chicken dinner and pork chops costing more.
Chances are they’ll cost about the same… and maybe even less in the coming months.
The reality is the months ahead are about candy and turkey. The lowly chicken is for summertime grilling on the barbecue.