The rise in consumer demand for chicken since the 1980s has been nothing short of meteoric. But it now shows some signs of slowing. True, chicken demand is still growing, but the current pace is a crawl compared to the past.
"We're getting close to a point of market saturation for animal proteins as a whole," says Bill Roenigk, vice president of the National Chicken Council. "There may be some jockeying for consumers among the different meats, but I think demand growth will be more modest in the future." Roenigk points out that last year, chicken demand was up about 1.4 percent, which is below the normal steady demand growth. The Chicken Council measures demand as price x consumption, then adjusts for inflation.
Chicken demand is driven by price, price of competing meats and availability of all meats at the retail level, says Roenigk. If one meat is out of stock, that helps fuel consumption of competing meats, so category management becomes important. And that's where chicken's case-ready products have dominated.
A U.S. economic slow down, which appears to be in the cards, may not be entirely negative for chicken demand, says Roenigk. Chicken sales have been less affected by economic slow downs than pork or beef because poultry products tend to be cheaper to begin with.
In addition, chicken long-term demand rise has been fueled by new products, human health and convenience issues.
"We've seen that consumers are willing to pay more for convenience and quality – but not a lot more. So price remains important," Roenigk says.
The USDA's retail composite indicates that the retail price for chickens has remained fairly steady from the levels of the past couple of years. However, Roenigk acknowledges that retail prices have inched up, with additional packing costs, more governmental requirements and the companies trying to drive down costs and increase profits.
"Consumers also suggest food safety is important, and chicken is recognized as fairly safe," Roenigk says.
Chicken's vast infiltration into foodservice also is a major reason why chicken ruled the roost among protein sources in the 1980s and 1990s. "Fast-food placement was the biggest thing that drove chicken demand," says Steve Meyer, director of economics for the National Pork Board. "The slow down in the number of fast-food products has been one of the problems in chicken demand over the last couple of years." Meyer points out that the foodservice industry is an area pork could improve on to boost demand. "Pork has owned breakfast, but has not done as well in the area of other products, like sandwiches." Chicken exports remain strong this year, showing an increase of more than 13 percent, equaling 6.25 billion pounds of product, says Roenigk. That accounts for more than 20 percent of U.S. chicken production, an increase from 6.4 percent in 1991. Russia is the largest export market for U.S. chicken with China/ Hong Kong, Mexico and Japan also being strong markets.
Even with this picture of what the chicken industry will look like in the coming years, it still leaves the question of what this means to pork producers.
"There is some tradeoff between the two meats, but price has to move pretty dramatically now to make a difference, compared to the past," Roenigk says. "However, all meats are competing for meat-case space and the consumer." The basic feeling is that higher demand leads to higher retail prices, which might cause some consumers to substitute another meat option – possibly pork. However, the correlation is not as strong as it has been in the past.
"The effect of chicken demand, or demand for any competing meat for that matter, on pork prices is pretty small," Meyer says.