SPRINGDALE — Poultry insiders don’t expect chicken demand to improve significantly before 2010, an indication that more production cuts may be needed to help processors like Tyson Foods, Simmons Foods and Sanderson Farms return to profitability.
Despite lower grain prices, chicken processing margins have averaged just 3 cents per pound since January. While that’s an improvement over the negative margins from a year ago, it pales in comparison to the 7-cent margins in the same period of 2007, according to Farha Aslam, analyst with Stephens Inc.
Aslam said corn prices fell 17 percent in the recent quarter, when compared with a year ago, and soybean meal — the other main feed ingredient — is down about 10 percent in the same period.
Industry leader Tyson Foods Inc. would not disclose how much less it expects to pay in grain costs this year. However, its competitor, No. 4-ranked Sanderson Farms, said last week it expects to reduce its feed costs by $129 million from a year ago.
As grain prices have come down, so has demand for poultry, which is keeping the profits at bay for processors.
“We are seeing lower demand in the foodservice customer base. We have made adjustments in bird weights to ensure our production meets with our customer’s needs,” said Todd Simmons, president of Siloam Springs-based Simmons Foods.