By David Fickling
(Bloomberg Opinion) — What do you get when three pandemics coincide with a drought? The most expensive chicken we’ve seen in years.
Prices for the world’s most consumed meat have been surging in recent months. Retail whole chickens in the US cost US$1.79 per pound in April, the highest price in 15 years of records and about 19% more than their 10-year average. In Thailand, the fourth-biggest exporter after the US, Brazil, and European Union, similar birds last week were at 62.50 baht (US$1.82) per kilogram, a one-third increase in six months. Wholesale frozen chickens in Brazil were going for 10.21 reais (US$2.12) per kilo May 19, more than double their 10-year average.
There have been some shocking dislocations as a result. Malaysia this week said it would halt exports of the meat by the end of this month to ensure it had sufficient domestic supplies. That’s caused a degree of alarm in land-poor Singapore, which considers Hainanese chicken rice its national dish and depends on its neighbour for a supply of fresh birds. Taiwan went the other way last month, relaxing quarantine restrictions on poultry to increase imports from the US.
In the US, servings of chicken wings are going for twice what they cost a few years ago, while the UK supermarket chain Co-operative Group Ltd. has warned that the meat could soon become as expensive as beef. The shares of poultry producers such as Pilgrim’s Pride Corp. and Tyson Foods Inc. have been surging.
The cause of all this chaos has been a veritable cavalry charge of apocalyptic horsemen. Three separate pandemics are squeezing white meat. A variant of avian influenza that rarely infects humans but is devastating to flocks has swept through the major producing regions. The result has been mass culls as farmers have struggled to halt the spread. In the US alone, more than 38 million chickens have been killed off since the start of February. In France, one in 20 birds has been culled. Among the world’s major poultry producers, only Brazil and China have remained immune so far.
In normal times, the impact would be muted as consumers switched to alternatives — but a second pandemic, African swine fever, is still sweeping through the world’s pig herds, especially in Asian countries where pork is a particularly common substitute for chicken. As a result, this alternative isn’t playing its usual role as a safety valve to reduce the strain on poultry when demand for animal protein starts to outstrip supply.
As if that wasn’t enough, there’s our own pandemic to consider. Chicken is a particularly popular meat for fast food and restaurants, with about half of poultry in the US cooked outside the home. During the two years of Covid-19, that end of the market entered a prolonged slump, helping drive American retail prices to an eight-year low early in 2020.
As the world returns to normal, however, resurgent demand is butting up against an industry that’s adapted to more limited Covid-era consumption levels. The market for chicken can rebalance with remarkable speed — chicks can be raised to slaughter weight in just over a month, compared with six months for pigs and more than a year for cattle — but it would still take time to rebuild flocks to normal levels, even if avian influenza wasn’t a factor.
As if all that wasn’t enough, there’s also the impact of drought to consider. The cost of chicken is so intimately related to the grains used to fatten broilers that analysts often study price-feed ratios, which estimate meat as a mathematical product of corn and soy prices in much the same way that oil refiners’ margins are stylised as the spread between crude and major products.
Corn, the most important feed grain, hit its highest level in 10 years in April and is costing roughly double what it did for most of the 2010s. The La Nina climate cycle, which typically brings dry conditions and weak farm yields to corn-growing areas of the US Midwest and South America, is currently entering its third consecutive year. American soybeans also tend to suffer during La Nina cycles, although tropical crops from Brazil do a little better.
In rich countries, people can mostly take this in stride. Chicken price rises aren’t cutting into incomes to nearly the extent that the cost of fuel is, and in places where food represents 10% or so of spending, it’s not hard to shell out a little more. Where nutrition takes up a third or more of household budgets, as in developing Asia and Africa, people will have no choice but to do without. Even in relatively affluent Brazil, consumers who in recent years have traded down from beef to chicken, are now cutting out meat altogether or substituting with eggs or pork, as years of recession and inflation cut into incomes.
While the world needs to reduce its meat intake, this is no cause for celebration. Protein is still an essential part of a balanced diet — and the rich will have little trouble affording it, this year and next. In poor countries most at risk of undernourishment, however, one source of essential nutrition and pleasure is gradually slipping out of reach.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
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