The Demand for Poultry
Did you realize that the average consumption of chicken has more than tripled since 1960 to around 86 pounds of chicken per person? Before crying ‘fowl’ you should read this article by James M. MacDonald, an expert on broiler production in the United States. His article, written for the United States Department of Agriculture is nothings short of fascinating. In it, Mr. MacDonald provides an in depth description of the state of the broiler industry. The article is a bit dated (it was written in 2008). Nevertheless, it is a wealth of information that outlines how the broiler industry is organized, from top to bottom. What I’ve discovered is that the broiler industry is very organized and highly vertically integrated.
I am particularly interested in the details as I am appraising two broiler houses in Ohio County, Kentucky. Writing a market analysis for the broiler industry has been especially challenging. If you’ve never done it, you should try it! Ok, that was a joke. :)
The truth is, I’ve stayed up late at night over the last week trying to wrap my mind around what drives this industry. What are the forces driving the supply and demand for broiler houses? Well, for starters, every time we visit KFC or stop by McDonald’s to treat the peeps insatiable craving to get their 86 pounds of those crispy little treats, we’re driving demand. Exports are another source driving demand. If you’ve taken Economics 101 you probably realize that a weak dollar is not a bad thing, especially when it comes to chicken. You see, the loss of the value of a dollar against other currencies makes our goods cheaper relative to their currencies, increasing demand for goods produced in the U.S. and driving up exports. Another little factoid – the United States is the world’s second largest exporter of chicken.
As far as the State of Kentucky is concerned, we lie along the northern edge of chicken production which is concentrated in the Southeast United States. Kentucky is the 8th largest broiler producer in the United States. Broiler chickens are also among our top five exports. This bodes well for the chicken bidness, as we say in the south, here in Kentucky. And this…is a good thing.