Poultry profitability is coming under pressure as prices decline amid growing supplies. A new report from CoBank says the U.S. chicken industry has experienced an unprecedented run of historic profitability since 2012 and responded by significantly increasing production and processing capacity.
Six new poultry processing plants are expected to be operating by 2020, while production and supplies of competing animal proteins are expanding. Current projections for chicken production growth are 1.5 percent, which is well below the 2.5 percent average rate in the last five years.
However, CoBank economist Will Sawyer says lessons learned from the last market downturn have driven important changes, strengthened the industry and made it more resilient to a potential market slide. Many chicken companies found themselves with burdensome levels of debt that became unsustainable when corn prices more than doubled in 2008 and 2009. T
oday, the average chicken producer has almost as much cash on hand as debt on their balance sheet, making them far more resilient to any downturn in chicken prices and margins.