Chicken's biggest problem was too much chicken

Tom Hensley, president of Fieldale Farms, a large Georgia-based chicken company, displayed some math earlier this year that was reported in a column in Feedstuffs early last month.

Hensley compared chicken company returns from June 2004 - "the best of times" for chicken producers - with November 2008, aka "the worst of times". Not exactly a fair comparison, but whatever. (Who wouldn't want to compare a tough year to the best of times....like the best of times could just go on forever.)

Every one of the top 25 chicken companies in the country made money in 2004. (How could they loose money? Breast meat was selling for $2.50/lb and chicken production was inline with demand. The global economy was booming.)

In November 2008, only one company made money, and only two made money for the year. Why? Well, high corn prices 'due to ethanol', is the standard (and bogus) line. Hensley did acknowledge 'excess production', too, but take a look at the details below and try to figure out how anyone could blame corn ethanol for the bulk of the chicken industry's woes in 2008.

Breast meat in June 2004: $2.50/lb.
Breast meat in Nov. 2008: $1.00/lb.
...a decline of $1.50/lb.
(breast meat in Feb. 2009 was $1.07/lb.,
26 percent below Feb. 2008)

Breast meat in storage June 2004: 20 million pounds
Breast meat in storage Nov. 2008: 35 million pounds
...over production and reduced demand

Feed/ingredient cost June 2004: 20 cents/lb.
Feed/ingredient cost Nov. 2008: 25 cents/lb.
...an increase 5 cents, or 25 percent

Average live weight cost of production June 2004: 30 cents/lb.
Average live weight cost of production Nov. 2008: 39.9 cents/lb.
...increase of 9.9 cents, or 33 percent
(birds were raised to heavier weights in 2008,
and there were a lot more birds on feed)

The least profitable company was loosing 21.38 cents/lb. in November last year. Even if feed costs were the same as four years ago, this company would have been loosing money.

Yes, feed costs were up last year for chicken companies. No surprise there. Yet as vocal as Big Chicken and others were about corn prices and ethanol, one was led to believe that was the biggest problem the sector faced.

Turns out, the biggest problem for Big Chicken was simply too many big chickens.

The industry simply over expanded after having several banner years in a row and did not respond to the economic slowdown quickly enough. It's a classic example of "blame shifting" - publicly blaming one thing to draw attention away from the real problem.

(For the record, Hensley forecasted a return to profitability for the chicken industry this year - likely in the 3-5 cents/lb. range.)