Retailer margins reverting to previous levels as they lower chicken prices could help poultry processors, Rabobank said. “However, (retailers) cannot be seen as the catch-all solution” for the poultry industry, they wrote.
“Both foodservice and retail customers are struggling,” Rabobank said. “The industry needs to exhibit more discipline on both the production side and in holding out on pricing for its product. This is easier said than done, but there is no alternative. The current situation is unsustainable.”
Ultimately, the chicken industry “is likely to evolve so that it comes into stronger and fewer hands,” the Rabobank analysts said, without specifying which companies may emerge as the industry consolidates.
“Larger, publicly-owned companies will have to demonstrate more discipline that is currently the case among many smaller, privately-owned companies,” they wrote. “This can occur if the market drives out players, as is happening today, or if companies take action on their own through mergers and acquisitions.”
It’s “better to choose your own fate early than to wait until all your grandfather’s equity is gone,” they added.