High-flying wings cheer U.S. chicken companies

Customers with the munchies pay what it takes

chicago /reuters Chicken wings, those heavily seasoned tidbits served in sports bars and at-home football parties, are giving the chicken industry a lot to crow about as sales have largely weathered a recession and a doubling of prices.

In addition, industry forecasters predict continued strong demand as sports fans will nosh on wings at sports bars from now through the National Football League’s 2013 Super Bowl in February and college basketball’s March Madness.

Pilgrim’s Pride Corp., the No. 2 U.S. chicken producer, last week reported a better-than-expected quarterly profit, in part because of the nearly $1-per-lb. increase in wing prices versus a year earlier. Breast meat, the industry’s top revenue producer, only increased 20 cents.

Tyson Foods Inc., the No. 1 chicken producer, will report earnings later this month and Sanderson Farms Inc., the No. 4 producer, will report in December. Tyson produces beef, pork, and chicken, while Sanderson is strictly chicken. Analysts expect both to post better-than-year-ago profits.

Privately held Perdue Farms is the No. 3 producer.

The main reason for higher prices is there are fewer wings and other chicken products, because high feed prices have forced the industry to reduce production.

There were will be fewer wings and higher prices in 2013 as well as the chicken industry is expected to trim production some more. Pilgrim’s Pride told analysts after its earnings that U.S. chicken production in 2013 should be down two to three per cent from 2012.

While wing prices are due to go higher in coming months and there will be fewer of them, analysts doubt demand will greatly suffer at restaurants and bars.

“Wings are relatively inelastic. People want to eat them, they are not so concerned about price,” said Paul Aho, an economist with the consulting firm Poultry Perspective.

Also, wings are fairly inexpensive when compared with beef, pork and chicken breast meat. That has kept demand strong despite the recession and high gasoline prices.

“Even if you lost your job, lost your house, I still think you would still want a beer and wings,” said Aho.

Once an industry byproduct, wings are now the chicken industry’s No. 2 seller behind breast meat. They account for 25 per cent of the industry’s revenue, versus 17 per cent eight years ago. Breast meat is 37 per cent, down from 53 per cent eight years ago.

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