Similar to most industries, poultry markets are cyclical with highs and lows, but in 2006, an already costly energy market teamed with a strengthening ethanol market to drive up feed costs, and public fears about avian influenza worldwide diminished or eradicated strong profits achieved in the previous two years, Delmarva Poultry Institute Executive Director told Eastern Shore representatives earlier this month.

In the past two decades, the poultry industry has seen steady 3 percent to 5 percent annual gains. In 2006, however, top poultry companies such as Gold Kist lost $17.7 million versus $112 million earnings the year before. Sanderson Farms and Pilgrim's Pride also sustained $11.5 million and $34 million losses versus $71 million and $265 million in profits in 2005, Satterfield reported. Tyson Foods chicken division's operating income was $53 million last year, only one-tenth of its total the year prior.

Delmarva's poultry producers such as Perdue are privately owned, but a spokeswoman acknowledged that it, too, felt a backlash.

"This is a cyclical business. We are subject to the same market forces as everyone else," said Julie DeYoung. "We've been through periods of high cost before. We'll have to wait and see how the corn market plays out."

While constant publicity of an avian flu pandemic dominated news during the first half of 2006, the rise of ethanol as a fuel-efficient additive and alternative-fuel stirred the second half of the year. The growing demand for the corn-based product has shot up corn prices to levels not seen in a decade. The news is good for corn farmers. It's bad for poultry growers.

"Poultry companies are very concerned with the price of feed ingredients because ethanol is taking a great deal of corn out of the animal feed market, and the costs of feeding the birds is the biggest cost to raising chicken," Satterfield said. "Sixty percent of the diet is corn."

Source: Delmarva daily Times