Low-priced drumsticks beat path to U.S. dinner tables

Reuters News
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Posted: May 25, 2011 4:06 PM
Low-priced drumsticks beat path to U.S. dinner tables

By Bob Burgdorfer

CHICAGO (Reuters) - Chicken drumsticks are finding their way to American dinner tables as a slowdown in exports has kept more of the dark meat in U.S. grocery stores and warehouses.

Historically, chicken dark meat -- long shunned by U.S. consumers in favor of white meat chicken breast -- has largely been exported by U.S. chicken companies.

Now, the low-priced meat may be an easy sell with unemployment rates high and a record 44.2 million Americans on food stamps. A bone-in chicken leg quarter (drumstick and thigh combined) is about 50 cents a lb wholesale versus $1 or more for boneless chicken breast.

(Graphic: http://r.reuters.com/byb79r)

Tyson Foods Inc, the top U.S. chicken producer, said it will divert more of its chicken dark meat to domestic markets. In addition to drumsticks and thighs, Tyson this summer will market a variety of dark meat items including pizza toppings, ground chicken and smoked sausage.

"We are making it more available to U.S. consumers than it has been in the past," Tyson spokesman Worth Sparkman told Reuters. "Consumers watching their pocketbooks are quickly recognizing the value in these products, so we expect to see growth there."

Other meat companies may follow because dark meat chicken is piling up in warehouses. The supply of leg quarters is the largest since 2004.

LOW-COST MEAT AND THE FOOD STAMP USER

"If you are eating on food stamps, leg quarters look like a pretty good buy," said Paul Aho, economist at Poultry Perspective. "We still have 9 percent unemployment. It will be interesting to see, when people do go back to work, if they will keep eating leg quarters."

And the price discrepancy between white meat and dark meat could widen further as domestic supplies increase.

"Every dark meat item in the U.S. is being sold at a larger discount than if we had exports, because we are overwhelming the domestic market," said Jim Robb, economist at the Livestock Marketing Information Center which provides economic analysis to the livestock industry.

The addition of this lower-cost meat on U.S. store shelves has the potential to draw business away from higher-priced beef and pork as consumers struggle to save money.

"It has not yet spilled over into the red meats or turkey. Given the economic environment we are in, it is surprising we have not seen more spillover. That does not mean it won't happen soon," Robb said.

Tyson is the only major U.S. chicken company that has revealed plans to market more dark meat chicken in the United States. But Bill Roenigk, vice president at the National Chicken Council, said other chicken companies may consider similar moves.

"I think Tyson and other companies that are trying to build on this growing interest in the domestic consumer are going to be successful," he said.

TWO BIG BUYERS CUT BACK

China and Russia, which two years ago bought more than a third of U.S. chicken exports, are buying fewer and fewer chicken legs and thighs.

Russia has slowed purchases as it works to expand domestic production, while China has bought less due to anti-dumping duties on U.S. chicken.

Year-to-date U.S. chicken exports are above a year ago, but may slow later with USDA estimating annual exports down 5.5 percent from 2010.

Sanderson Farms Inc, the No. 4 U.S. chicken producer, said on Tuesday its export sales for June have slowed.

While a drop in chicken exports has motivated this shift to domestic markets, demand patterns for dark meat chicken are changing in the United States.

Altin Kalo, analyst at Steiner Consulting, said dark meat is a favorite in U.S. Hispanic and Asian communities that are growing rapidly.

"Except in the U.S. and Europe, dark meat is the preferred meat worldwide," he said.

(Reporting by Bob Burgdorfer; Editing by K.T. Arasu and Jim Marshall)