High chicken prices due to the production constraints have helped push up the stock prices of Tyson and Sanderson this year, by about 17 percent and 38 percent, respectively. Both Tyson and Sanderson reported net income more than doubled in their fiscal second quarters.
Constrained production has helped push chicken prices in Georgia, a key market, to record highs, analysts said. Boneless skinless breasts there recently were priced at $2.21 a pound, up 4.5 percent from a year earlier. The production shortfall is adding 50 cents per pound to the cost of chicken breasts, which sell for about $2.02 per pound in the northeastern United States, Aho said.
Chicken prices are heavily dependent on favorable pricing of feedstuffs, such as corn prices and soybeans, as feed makes up the majority of the cost of raising poultry. have risen sharply since the beginning of 2007 - more than 150% in 2007 and early 2008 - as producers have increased their demand for the commodity (rising oil prices, in turn, have increased demand for ethanol). Corn is also the main input for many other food products such as high fructose corn syrup that are in increasing worldwide demand - but nonetheless the USDA expects U.S. farmers to plant 8% less corn in 2008, lowering supply and increasing prices. Additionally, the June 2008 flooding of Iowa is expected to destroy more than 200 million bushels of corn, further reducing supply. Any long-term, significant increase in feedstuffs prices has the potential to seriously increase chicken prices.