Meat + Poultry - December 2004 - 18

2005 Outlook

Poultry

for many, if not most, companies," he says. "By mid-year, however,
prices and profits began a sharp return to more modest and more
normal levels."
What did the poultry industry learn in 2004? Speaking for Pilgrim's Pride, Emery says the company learned that it's smart to
keep thinking ahead. "We're clearly in a world economy and a world
market, and we have to manage it as such," he says. "We have to
be a lot smarter about what we do, and we have to always look for
the next opportunity."

"The economy is not going to
be terrible, but it's not going
to be great."
- Dan Emery

So it's on to 2005, and the poultry industry expects more of the
same in terms of challenges on several fronts, including economic, export, marketing, labor and animal welfare.
Emery expects a soft economy in 2005 that will affect poultry
companies. "The economy is not going to be terrible, but it's not
going to be great," he says. "We'll have more supply on the chicken
side and less supply on the turkey side."
Broiler production could increase 3.1 percent in 2005, according
to the U.S. Dept. of Agriculture's Economic Research Service. If production does increase to that level, broiler output would be 35.125
billion pounds compared with 34.074 billion pounds this year.
Most poultry company executives would say the industry's biggest challenge in 2005 will be regaining lost export markets, such
as China. Roenigk says companies also have to watch corn and soybean prices with a keen eye. "Despite record harvests, strong world
demand for feed grains and oilseeds coupled with less-than-robust
harvests in the Southern Hemisphere could change the price outlook
for important feed ingredients," he says. "Also, if the Food and Drug
Administration overly restricts the use of certain rendered meat byproducts, the cost structure of protein meals could shift significantly."
Increased energy prices, especially for oil, also must be watched
closely. "The question is: How do you recover (money spent on increased energy prices)," says Emery. "It's difficult. We are in an efficient and low-margin business. So the guy who is most efficient in
the end - combined with who has the most dynamic approaches - is
the guy who wins."

poultry. "Export challenges will continue as importing countries
misuse sanitary and veterinary provisions as non-tariff trade barriers," says Roenigk.
He points out that chicken exports in 2004 will only account for
about 13 percent of total U.S. chicken production compared to
more than 15 percent in 2003 and 2002, and more than 18 percent in 2001.
Poultry companies believe they're doing a good job of combating
A.I., but they must be unwavering in their approach. Tita Cherrier, spokeswoman for Salisbury, Md.-based Perdue Farms says the
company has taken a strong stand against further outbreaks of A.I.
Perdue knows how A.I. can harm an operation. This past February,
company executives announced that a case of A.I. discovered in
Delaware came from one of its farms.
"Domestically, the U.S. poultry industry and U.S.D.A are together
more fully addressing the issue of A.I. incidents," N.C.C.'s Roenigk
says. "Stepped-up biosecurity and more aggressive management
of live bird markets are keys to getting a handle on A.I."
Pilgrim's Pride's Emery believes U.S. poultry companies have
done a good job controlling and containing A.I., although it remains
a problem in Asia. "It goes back to the fact that you have all these
wild flocks [in Asia], and you have people who have fighting cocks,"
he says. "That's really where A.I. comes from. It's a problem that
hasn't been solved."
Welfare awareness
This past summer, a member of the People for Ethical Treatment of
Animals was hired at a Pilgrim's Pride plant in West Virginia and filmed
workers abusing lived chickens on the processing line. The results included bad press, corporate embarrassment and the firing of 11 Pilgrim's Pride employees.
Poultry industry experts believe such incidents by interest
groups will continue in 2005. It's not a matter of companies like

Top of mind - A.I. and animal welfare
A problem with the export market is it's out of poultry processors' hands. Foreign governments are quick to use any A.I.
breakouts as excuses to impose prolonged import bans on U.S.

MEAT&POULTRY

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DECEMBER 2004

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Meat + Poultry - December 2004

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