Edit

Poultry Profit Makers

Restaurants traditionally rely on chicken and turkey to be menu profit makers. Usually in good supply and always a good buy in relation to other proteins, operators often turn to poultry to keep costs in check when red meats and seafood skyrocket. But that strategy may be dampened in the months ahead. Chicken production is down and feed costs are up, making it more expensive to buy and menu the bird. Prices are expected to remain higher over the next several months. Although turkey production has increased, supplies are expected to be relatively tight throughout 2007, predicts the USDA’s Economic Research Service.

State of the Industry

Several producers identify the top issues and challenges that will affect poultry purchasing.

  • Fewer, more expensive birds. With corn and soybeans going into higher-profit ethanol production instead of animal feed, wholesale chicken prices have already risen 20 to 25 percent and birds may eventually cost 30 to 35 percent more. “Feed—especially corn—comprises 40 to 45 percent of the cost in producing chicken. Our biggest concern is, Will there be enough corn?” says Mark Hickman, chairman of the National Chicken Council. It takes seven pounds of grain to create one pound of chicken—a lower conversion ratio than beef, pork or turkey, but still significant.
  • Chickens continue on the large side. Six pounds live is the industry standard, reported a panel of producers at the National Chicken Cooking Contest held in May in Birmingham, Alabama. It’s more economical to grow birds big, the panelists agreed. And big-breasted chickens help fulfill the huge demand for white meat. If smaller, portion-controlled tenders or breast fillets are key to your menu, you will probably have to work directly with a processor to get your specs.
  • Natural is on the rise. “The use of antibiotics is down drastically from a few years ago [and American producers don’t use hormones], but consumers still have the perception that chickens are full of hormones and drugs,” says Jim Perdue, CEO of Perdue Farms. Newer to foodservice are poultry products labeled “all-natural”; they now accoun for 5 percent of the market. Tyson just began offering an all-natural line and smaller companies, like Free Bird and Murray’s, sell only natural chicken. “All-natural” has no official definition but generally refers to minimally processed birds free of antibiotics, hormones, chemical preservatives and artificial colors or flavorings.
  • Organic chicken is growing but from a very small base. Organic comprises only 1 percent of U.S. production. However, the USDA forecasts that organic poultry sales should grow between 23 and 38 percent through 2010.
  • Melamine is not an issue with American birds. Recent news from China showed the presence of melamine—an industrial chemical that can be toxic to animals—in pet food and chicken feed. The large American poultry producers do not import feed from China, the industry reports. While some tainted feed did reach chicken farms in Indiana last May, the FDA assured the public that it poses a very low risk to humans. The FDA is currently investigating Chinese sources to make sure no more contaminated feed is exported.
  • Avian flu is less of a threat. The government and industry have worked together to limit the risk of an outbreak through continuous testing and monitoring of commercial flocks and wild birds. “The risk is still not zero, but we are in a much better position than we were this time last year,” NCC’s Hickman states.

Turkey Update 

Turkey supply will be about the same as in prior years—farmers continue to get strong prices for turkey meat, providing incentive to keep numbers up. But 70 percent of the cost of raising a turkey comes from the feed—a factor that may eventually affect production and tighten supply, predicts Sherrie Rosenblatt, VP marketing, the National Turkey Federa-tion. In May, her organization joined with the National Chicken Council and other meat, livestock and poultry associations to form the Coalition for Balanced Food and Fuel Policy. The Website, www.balancedfoodandfuel.org, informs policy makers and the public about the negative impact the government’s ethanol policy is having on the industry and end users.

Although the supply of turkey meat in pounds remains stable, more birds are being raised because a smaller size is in demand. “Producers are looking for ways to shorten the time it takes to get turkey to restaurant customers,” says Rosenblatt. Boneless turkey rolls, turkey burgers, turkey breakfast meats and value-added “ethnic” products are growing in popularity.

These trends are influencing menus—turkey mentions showed a double-digit increase over the past year, according to Food Beat, a menu tracking service. Turkey sandwiches—including paninis, wraps and melts—now account for 70 percent of those items, but on its website, www.eatturkey.com, the NTF is seeing operator interest in soups, lasagna and Mexican entrees. 

Market report

The latest figures from the Economic Research Service of the USDA indicate that the chicken supply will total 35.6 billion pounds in 2007—only a slight decrease from 2006 but the first drop in production since 1973. Since chicken exports are expected to expand to 5.4 billion pounds, it looks like there will be less chicken available for both foodservice and retail. The chicken industry predicts that consumption will go down to 85 pounds per person, blaming the decrease on the increased costs of feed and production. Consequently, prices are expected to remain considerably higher throughout 2007 and into 2008.

Of all the chicken parts, wings are strongest in demand by foodservice with prices to match, according to Advanced Economic Solutions, an Omaha, Nebraska company that specializes in agricultural markets. Tracking prices from January 2002 to April 2007, wings have reached their highest peak: $1.40 per pound. Breast meat showed seasonal highs of nearly $2 per pound wholesale back in April, but now seems to be leveling off. As long as corn prices don’t soar out of control in the next six months, profit margins should remain acceptable, the company forecasts.The ERS estimates turkey meat production at 5.8 billion pounds in 2007, up 2.4 percent from last year. Prices for whole turkeys remained strong through the first quarter of the year, about 4 percent higher compared to the same period in 2006.  Although turkey production and supplies are forecast to be slightly higher by year end, price decreases may be limited by higher prices for all the other proteins—beef, chicken, veal and pork.

Evolution of a chicken product

At Moe’s Southwest Grill, an Atlanta-based regional chain specializing in freshly made, customized burritos, signature ingredients are a big selling point. “We worked with one chicken supplier to develop the right cut size, flavor profile, marination level and packaging,” says Daniel Barash, senior director of operations and product development for Moe’s. “Our customers can choose any protein in any of our menu items, but 60 percent choose chicken.” Barash goes through these steps to make sure that the fresh, boneless, marinated chicken breast he buy is consistent in quality and taste.

1. Check specs at plant. Start at the processing end, examining the chicken to make sure the cut size, flavor profile, color, texture and aroma meet standards. If something is off, Barash suggests working with the supplier’s food scientists to reformulate.
2. Store the product. Place chicken under the same storage conditions used at your locations to test how it holds up.
3. Test in store. Using a small sample (20 pounds), cook chicken for varying lengths of time in several menu applications; taste for flavor, texture and consistency.
4. Ramp up operations. Go from 20 pounds up to 500 or even 1,000 at one store. Does product perform well at that volume?
5. Add product to inventory. “We contract out 8 million pounds of chicken a year,” Barash reports.

Trending

More from our partners