010343 Poultry Producers Face Market Woes

Salisbury, MD - Jim Perdue stands in his long white coat and hard hat, watching yellow, naked chicken carcasses glide by on their way to deboning, slicing and packaging.

In this business, where thousands of birds enter the slaughterhouse every day and prices for them are at historic lows, Perdue counts his profits by margins as slim as 1/4-cent a pound.

“There's an oversupply of chicken,” said Perdue, chairman and chief executive of Salisbury-based Perdue Farms Inc.

At the same time, the chicken industry is facing potentially expensive new regulatory demands and increasing competition in global trade.

Like other U.S. chicken companies, Perdue Farms is trying to lock up those slim profits and protect them from fickle commodity prices by unveiling new products, such as precooked chicken strips.

“We're going to increase our value-added product line, the prepared foods. That's where the consumer is headed,” Perdue said.

In the heart of the Delmarva (Delaware-Maryland-Virginia) Peninsula, where 606 million broilers were raised in 1999, poultry processors fret over the state of their industry.

“The last couple years have been difficult. They've been a struggle for all the companies,” said William Roenigk, economist and vice president of the National Chicken Council, a trade group.

“We're just putting too much meat on the American table. The way you sell too much meat is to lower the price so people can buy more, which is what they've done,” Roenigk said.

There's a lot on the plate for America's $27.5 billion chicken industry.

A U.S. Labor Department survey released in January criticized the industry's workplace practices, citing illegal child workers and unfair methods of tracking the earnings of hourly employees.

The Environmental Protection Agency's proposal to impose more regulations on large livestock operations -- like chicken farms -- also could create greater costs for the companies contracting with independent farmers to raise their birds.

The problems posed by the demand for housing in formerly rural areas and looming regulations to protect water supplies from chicken waste runoff are other industry concerns.

“Urban sprawl and government overregulation ... are the two major threats to the poultry industry in Delmarva,” said Ken Sterling, president of Delmarva Poultry Industries Inc.

Meanwhile, overseas markets like Hong Kong and Russia -- Nos. 1 and 2 for American chicken -- are being aggressively courted by poultry producers in Brazil and elsewhere. U.S. producers now ship 18% of their chickens abroad.

“If you look into Latin America, Brazil and Venezuela, the poultry industry down there has grown tremendously,” Sterling said. “Their industry is very modern, and U.S. producers are now competing with Latin American producers for what were our traditional markets.”

Shrinking markets overseas means burgeoning supplies domestically, forcing prices down.

According to the Georgia Department of Agriculture, producers have seen prices for boneless, skinless chicken breast plummet by more than 20% over the last three years.

On March 11, 1998, boneless, skinless chicken breast sold for $1.675 a pound. Last Friday, the price was $1.445.

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