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a. Employ demand and supply analysis to illustrate the changes in chicken prices described in the article.

b. Discuss what has happened in the corn and soybean-meal markets and how that has influenced the chicken market.

Article

It has been a tough year in the poultry business, with supply outpacing demand and feed-grain prices rising substantially. But producers are hoping all that changes when the summer cook-out season starts.

The seasonal upswing in chicken consumption, along with the anticipated jump in spot-market poultry prices, could bring some relief to producers whose profit margins have been slashed by surging corn and soybean-meal costs.

Rising feed-grain prices, accelerated by the diversion of corn to make ethanol, have pushed up the cost of producing a live chicken by as much as 65% over the past two years.

factors make analysts more optimistic:

Companies are cutting production, weekly egg-set numbers are declining (egg sets are fertile eggs placed in incubators), and prices are responding positively to the decreasing supply.

The production slowdown is a response to the surge in feed-grain prices last fall.

Profit margins at producers will not improve unless spot-market prices for chicken move up fast enough to cover costs paid for corn and soybean meal to feed chicken flocks.

Production cutbacks and seasonal demand have helped fuel a 20-cent increase in boneless, skinless breast-meat prices to $1.46 a pound. Prices are expected to reach at least $1.80 by summer 2008.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M937702

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