Concerns over avian-flu is prompting some consumers oversees to avoid chicken, even though there is no evidence that humans can catch the disease from eating cooked poultry. Last week in a move that caught U.S. officials off guard, Russia closed its borders to U.S. poultry products. Last year, the Russians accounted for about one-third of total exports, making it the most lucrative poultry export market. The decline in foreign demand is leading to an oversupply of chicken and wholesale prices are down about 10 percent from last year. This week, the nation's top chicken processors announced they would cut summer production.
With 83 chicken processing plants in 20 states, Tyson Foods is America's top poultry producer. But company officials claim burdensome supplies of chicken contributed to second quarter losses of $127 million.
While processors typically increase production during the peak summer months, Tyson announced this week it would cut production by nearly one percent this summer.
The nation's number two poultry producer also is mired in red ink. Pilgrim's Pride posted second quarter losses of $32 million. Shortly after Tyson's announcement, Pilgrim's Pride followed suit declaring a three percent cut in its summer production.
In separate statements, both companies expressed concerns over a decline in chicken exports due to a potential bird flu outbreak in the U.S. The deadly H5N1 strain of bird flu already has wreaked havoc in Asia and Europe.
The cut in chicken production is expected to provide support for wholesale poultry prices. And analysts predict it also will benefit pork and beef prices.