WASHINGTON – The US chicken industry is encountering permanent, rather than cyclical challenges, that will require significant changes in how the industry operates in the future, according to Rabobank International’s new report titled “This Is Not Your Grandfather’s Chicken Industry.” US companies will be required to develop new products for export to new export markets due to this rapid globalization, Rabobank said.
The US chicken industry is facing increased government regulation, which makes competitive cost management and efficiency increasingly difficult to achieve, the report stated. Rabobank claims the US chicken industry is experiencing its second major downturn in three years. Corn prices will fail to return to $2.50 per bushel, the study predicts.
Russia will soon be sufficient in chicken and will no longer be a major importer of US leg quarters and domestic demand has matured as US per capita poultry consumption peaked between 2004 and 2006. These factors, point to a secular change, not just another cycle, the study claims.
However, the US chicken industry has a favorable future, but structural changes regarding input costs and domestic and international demand will necessitate a new approach and increased management discipline. The study said balance sheets must be strengthened, risk management improvements must be made and cost volatility must be shifted to customers.