The Business Herald’s markets and banking reporter.

Why chicken is about to get pricey

Chicken prices are expected to rise.
Chicken prices are expected to rise.

Enjoy cheap chicken prices while they last.

That's the message consumers can take from a sharebroker's report that says a glut in New Zealand's favourite meat will shortly come to an end.

Average prices for fresh chicken pieces were 9 per cent lower in August than in March, according to the First NZ Capital research.

And whole frozen chickens were 16 per cent cheaper.

NZ poultry production rose 11 per cent year-on-year in the 12 months to June 2016, to reach 210,000 tonnes, according to the report.

First NZ said "oversupply conditions" had resulted in a build-up of frozen chicken inventory.

But the glut is expected to recede in the next few months as operators adjust production, according to the report.

First NZ said Tegel, the country's biggest poultry producer, was also increasing exports, which would allow domestic fresh and frozen chicken prices to recover.

"We note red meat retail prices have also been firming in recent times which could also help improve poultry price relativity going forward," the sharebroker added.

Michael Brooks, executive director of the Poultry Industry Association of NZ, said oversupply occurred from time to time when operators misjudged how much supply was needed to meet future demand.

"You're often making supply decisions one or two years ahead," he said.

"It's best guesses and best guesses can't always be right."

Brooks agreed that supply and demand would come back into balance shortly.

"The domestic market is growing at about 4 per cent [annually] and the export market continues to look good."

First NZ said a recent decline in Tegel's share price had been a response from investors to weakness in domestic chicken prices.

Tegel listed on the sharemarket in May at $1.55 a share and the stock traded as high as $1.78 in August before falling sharply, despite no bad news from the company.

The shares recently traded at $1.47.

"In our view this represents a buying opportunity," said First NZ, which has a target price of $2.10 on the stock.

Around 100 million chickens are processed annually in NZ for domestic consumption and export.

Poultry is this country's most consumed meat, having increased its share of per capita meat consumption from 6 per cent in 1970 to 50 per cent in 2014, according to Tegel.

- NZ Herald

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