There Is Plenty of Chicken to Make Up for Shortages of Red Meat

(Bloomberg) -- Covid-19 is ripping through America's heartland and causing shutdowns and slowdowns of plants that process much of the nation's pork and beef. Prices are already surging.

Chicken's a different story. It's still fairly cheap.

While there have been cuts to production at poultry plants, which are mainly located in the southern U.S., and reports of sick workers, the industry hasn't seen major closures.

Pilgrim's Pride Corp., owned by Brazilian meat giant JBS SA, is the second-biggest chicken producer in the U.S., and it has only cut output by a few percentage points in two of its businesses that target the restaurant industry. Pilgrim's is also ramping up to meet a surge in online grocery sales -- those saw a six-fold jump in the past four weeks, it said Thursday.

Chicken production in the nation is down about 5% from a year ago, Chief Executive Officer Jayson Penn said. That compares to output declines for other proteins of 35%, he said. Red meat is already getting pricey at grocery stores, Penn said, with ground beef and pork chop prices up a fifth or more.

“Chicken right now is the value option for many households where the budget is strapped,” Penn said on a call with analysts to discuss financial results. “People are looking right now for healthy foods, and foods that add to their well-being, and chicken right now falls directly into that category.”

While cracks have appeared in the nation's pork and beef supply chain as virus outbreaks idle or reduce output in slaughterhouses across the country, poultry processors haven't been hit by the same severity.

‘Got to Have Meat'

That's partly because the slaughter process for chicken is more automated than it is for pork and beef and few people work in areas of a plant where the birds are killed and de-feathered, said Mike Cockrell, chief financial officer of Sanderson Farms Inc.

The Mississippi-based company has only reduced its egg sets for chickens destined for food service, and hasn't reduced supplies bound for retail. Sanderson ran two of its plants last weekend and is running four this weekend to meet increased grocery demand amid tighter pork and beef supplies.

“They've got to have meat in the meat case so their orders for chicken have been very heavy,” Cockrell said by telephone, noting his local Kroger was out of beef and only had marinated pork tenderloins available earlier this week. “In the meantime, pork and beef is going to be expensive and chicken is going to look more attractive than normal.”

There's still enough chicken to go around globally, too. Exports to China are also surging, Penn said. He expects shipments to increase 15% this year for the company. A hog-killing virus swept through Asia last year, and destroyed much of the region's herds, which means they need overseas supplies.

“There is intent for China and the U.S. to continue to do business in the poultry sector,” he said. “All indications for me are that China will be there, and I don't see any reason why that's going to change.”