US government steps in to help poultry market

The US department of agriculture is set to buy up $40m worth of chicken products for federal nutrition assistance programmes, including donations to food banks.

In a statement issued in mid-August, US agriculture secretary Tom Vilsack said the purchase would provide welcome assistance to thousands of families in economically challenging times.

“It will also provide support to the broiler industry and the many small, independent poultry growers that depend on the industry for their livelihood. Broiler producers have already cut production substantially and this purchase will help them bring supply in line with demand.”

The move was welcomed by the National Chicken Council, representing the USA’s integrated chicken producer-processors. “At a time when the industry is under great stress due to the high cost of feed ingredients and the general economic slowdown, we appreciate the USDA’s willingness to acquire additional chicken for various feeding programs,” said president Mike Brown.

“Thanks to prevailing price trends, the government is getting a bargain on high-quality food to help meet the nutritional needs of the clients of these programmes, while the industry is getting some relief from excessive inventories.”

The pressure of surplus poultry in the USA has been reflected in recent financial results from the country’s largest processor, Tyson Food, which is warning of losses in its chicken division in the next finacial quarter.

Latest figures show the sector achieved an operating profit in the third financial quarter of $28m, equivalent to just 1% return on sales.

“There appears to be improvement in market fundamentals on the horizon, but the next few months will be very challenging,” said Tyson president Donnie Smith.

While USDA data shows that egg sets and broiler placements are falling, Mr Smith said this was not likely to help the market until the turn of the year. “Because of these factors, we expect our chicken segment will likely experience a loss in the fourth quarter of fiscal 2011.”

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