Prospects for Poultry

Elevated pricing will be offset by higher costs.

Welcome to the second issue of Protein Insights. We’re leading with our expectations for chicken and egg production in 2022. We looked at dairy, beef, and pork last week.

Chicken/Turkey

Demand: As the world comes out of the pandemic, chicken and turkey demand is expected to increase as more people are comfortable eating out and attending events. Poultry will also have less competition from other proteins as beef supplies tighten and more meat is exported. Plant-based meat replacers will increase market share in certain areas but are not expected to make big incursions into the main chicken and turkey market strongholds.

Profitability: Chicken and turkey prices are expected to stay strong well into the year as demand increases and the meat supply chain slowly refills. USDA recently increased its broiler price forecast by 10.5 cents a pound to $1.12/lb and its turkey price forecast by 2.3 cents per pound to $1.25/lb. The higher prices will be dampened by higher operating costs both at the farm and processing level. Inflated corn and soybean prices will put pressure on feed costs. We expect nutritionists to take a closer look at protein substitutes and maintaining tight formulations. Labor costs are also expected to increase, particularly on the processing side. We expect significant investment in automation to reduce headcounts on plant floors and in warehouses.

Technical Advances: The technology push in live production will be around advanced monitoring systems and software tools to improve production forward visibility. Most of the innovation is coming from computer vision systems to track bird activity and estimate weight. Over time, this technology can be trained to predict future growth rates more accurately and allow processing plants to plan harvesting at optimal times. We also expect the closer monitoring to help producers detect and treat disease more quickly, reducing mortality rates and lowering treatment costs.

Eggs

Demand: Egg demand is expected to grow in 2022 as more consumers venture out and have breakfast at QSRs or at hotels. According to the United Egg Producers, per capita consumption of eggs in the US has grown 15% in the past 20 years. The only years it has dropped in that time were less to do with demand than supply. In 2015, avian influenza decimated layer flocks. In 2020, Covid 19 was the culprit. In the shelled egg market, regional demand will vary

Profitability: As with other proteins, the egg industry faces significant appreciation in production costs. On its earnings report at the end of the fourth quarter last year, the country’s largest egg producer Cal-Maine Foods said farm-production costs per dozen eggs rose 21.6% in the quarter from a year earlier, primarily because of higher feed costs. Countering this, egg pricing has been rising steadily along with other food commodities. The Federal Reserve Bank’s Producer Price Index for fresh eggs stood at 198.9 in December, up 74.6% from June 2021. But another large cost factor looms for egg producers: the state requirements to switch from caged to cage-free hen-housing. California and Massachusetts required it at the beginning of the year; Nevada, Oregon and Washington State on January 1, 2024, and a host more on January 1, 2025. There are also a growing number of egg buyers in food service and retail who have pledged to only source cage-free eggs in the next few years. This may force producers to accelerate plans to convert housing and impact cash flow and debt levels over the next two years.

Technical Advances: One of the benefits of the move to cage-free housing is the opportunity for producers to invest in new technology to improve bird health and extend layer life and productivity. We expect to see increased use of robotics, computer vision, and advanced software in layer houses to improve production and reduce labor. We also see increased use of computer vision/AI in egg sorting and grading technology as well as new methods for sexing eggs in breeding.

Briefly

The US turkey and layer industries are on edge after the USDA's Animal and Plant Health Inspection Service confirmed the presence of highly pathogenic avian influenza in a commercial turkey flock in Dubois County, Indiana. This is the first confirmed case of HPAI in commercial poultry in the United States since 2020.

Well-known activist investor Carl Icahn is involved in a public spat with McDonald’s Corp. over the fast-food giant’s use of pork sourced from farms using sow gestation crates. Icahn is claiming that McDonald’s reneged on its 2012 promise to only source from crate-free farms by 2022. According to the Wall Street Journal, Icahn became involved in the crusade through his daughter, Michelle Icahn Nevin, a vegetarian animal-lover who at one point worked for the Humane Society of the United States. The elder Icahn owns a small piece of McDonald’s and is promising to make things uncomfortable for them if they don’t change their pork supply arrangements.

Merck Animal Health announced a four-year strategic alliance with Iowa State University to “address complex needs and expedite the delivery of animal health solutions to the marketplace.” Iowa State faculty and students will work with Merck’s veterinarians and staff on research projects involving companion, equine and livestock animals.

The University of Tennessee Institute of Agriculture has received a $1 million grant from USDA to conduct research with computer vision systems to monitor poultry production. Researchers plan to use deep learning and algorithms to identify individual birds as well as track welfare-related comfort behaviors like stretching, preening and dustbathing and production-related behaviors like eating and drinking. The computer vision hardware is estimated to cost of $2,500 per broiler house.

Deals

Dutch-based insect-based animal feed company Protix raised €50 million ($57.1 million) from a group of investors including the European Circular Bioeconomy Fund, BNP Paribas, the Prince Albert II Foundation, The Good Investors, Aqua-Spark, Rabo Investments, and Invest-NL.

People

Amanda Uitermarkt has been named USA Technical Director for swine technology company Jyga Tech USA, Inc. She joined JYGA in 2018 as a Sales and Technical Service Representative in the Midwest area. Uitermarkt graduated from the University of Tennessee in 2011 with a Bachelor’s in Animal Science and from Kansas State University with a Master’s in Swine Nutrition in 2013. The first five years of her career were with Carthage Innovative Swine Solutions, LLC.

Next week: We’ll be looking at how sustainability pressures are impacting livestock producers. Subscribe below to Protein Insights to get the next issue in your inbox and stay on top of news and technology trends in the protein industry. You might also be interested in our other ag-focused newsletter Modern Crop and our Demand Insights newsletter on trends impact consumer food demand.

If you have a new protein-based technology to talk about or other news about the protein industry to share, contact us at proteininsights@dekenmedia.com.