When I was completing my PhD I analysed the global model of poultry supply and spent a lot of time looking at the global dynamics of the industry. The majority of costs in the poultry industry are feed and energy to heat, light and ventilate the poultry houses to ensure an optimum environment for health and welfare. Both commodities have seen a significant rise in the last twelve months. In order to maintain current margins, this cost would have to be passed on to the retailer and customer and this is why there has been such a rise in not only meat but other food commodities. How much can be passed on is the big question? Added costs especially where they cannot be absorbed by the supply chain mean that businesses have to focus on their internal costs and reduce them where possible in order to stay competitive.
Marketwatch reports that US producers are reviewing their processing capabilities and how they can address these issues. Pilgrim's Pride is cutting production by 5% this year in an effort to rebalance their accounts. A UK poultry processors is closing one of its factories and investing in other sites. This rebalancing will continue for some time I am sure.
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