Beef becomes more profitable than chicken during the covid pandemic

Cheap chicken meat should be the pandemic's favorite protein. But companies with a greater focus on beef have shown better performance than those that depend more on poultry.

Chicken producers in the United States and Brazil face oversupply, low prices and weak demand. Analysts say cutting production may be necessary to sustain prices and defend margins. Beef suppliers, on the other hand, benefit from comparatively stronger prices and demand.

In the USA, meat production has recovered from the downtime caused by the coronavirus. With this, the supply exceeds the demand amidst the still weak sales in food services. With normalized production, beef must compete with chicken in supermarket sales.

"We are going to have a flood of red meat reaching the North American market," said Peter Galbo, an analyst at Bank of America, adding that retail beef options are expected to increase "dramatically" in the fourth quarter.

But chicken prices are too low and demand too weak to justify promotions that can help generate sales. In Brazil, the largest chicken meat exporter, lower production, or a price adjustment may be inevitable to offset the sharp rise in feed costs, said Ricardo Santin, president of the Brazilian Association of Animal Protein (ABPA).

Domestic corn and soybean meal prices rose to historic highs amid strong demand and the dollar's rise against the real, making exports more competitive. With limited supply, corn prices are expected to remain high this year. The government evaluates temporarily exempting imports from outside Mercosur from tariffs to reduce costs. The feed accounts for almost 80% of the cost of poultry production in the country.