It looks like you and I will be eating more chicken this 2014. Retail beef prices remain at record highs, and we consumers will likely be driven more toward comparatively cheaper chicken meat in 2014. Given this trend, loading up on shares of Sanderson Farms (NASDAQ:SAFM), Pilgrim's Pride (NASDAQ:PPC), and Tyson Foods (NYSE:TSN) should be worth considering.

Lower feed costs loom as the main growth drivers for these poultry product producers. For Sanderson Farms in the fourth quarter, the feed cost per pound for its processed broiler flocks dropped by $0.042, or 9.7% from a year earlier. This decline came about as the rise in grain prices moderated during 2013's fourth quarter. Optimistic forecasts on corn and soybeans harvests, major feed ingredients, prompted the price retreat from the previous months' record highs.

Banner year for crops
The grain price downtrend is likely to continue, with banner U.S. corn and soybean harvests expected. The U.S. Department of Agriculture expects the 2013 soybean harvest to be the third-highest on record at 3.26 billion bushels, up 7% from 2012 and 3% above its previous forecast. 

The USDA likewise forecast that the 2013 corn crop will reach a new record high of 13.99 billion bushels, above its earlier forecast of 12.8 billion bushels as well as the previous high of 13.1 billion set in 2009.The current corn and soybean crop in South America, reported as progressing well, also portends favorable grain prices for U.S. chicken producers.

Premium pricing
The poultry products manufacturers also continue to benefit from a restricted chicken supply, which resulted from the drought-induced shortage and high prices of feedgrains from 2010 through most of 2013. This enabled chicken producers to command premium prices for their products and boost revenue.

In its fourth quarter Sanderson Farms reported that its sales rose to $727.1 million from $648.4 million a year earlier. Pilgrim's Pride's third quarter revenues, on the other hand, rose to $2.14 billion from $2.07 billion a year ago.

Tyson Foods, citing strong U.S. consumer demand for chicken, said its fourth quarter revenue rose 7% to $8.89 billion. In its full 2013 fiscal year, the company also noted that its poultry revenues led those of beef and pork as fresh chicken sales in the U.S. were estimated to have grown 2%, despite a 7% increase in prices.

More chicken in fast-foods
Chicken producers also stand to draw tailwinds from the initiatives in the U.S. fast-food industry to boost sales and profitability while at the same time addressing consumers' obesity concerns on their fatty meal offerings. This was seen in September when McDonald's, which already has chicken McNuggets and chicken McWraps in its menu, introduced Mighty Wings.

Though McDonald's Mighty Wings' takeoff now appears to have sputtered, don't expect this fast-food chain giant to give up so easily. In a recent Bloomberg article, McDonald's was reported as "bringing Mighty Wings back" and it's working on product pricing and flavor. 

The stakes are high here. Chicken wings sales were estimated to have grown by 11% to over $8 billion in 2012. This market niche has already proven lucrative for Buffalo Wild Wings and the KFC franchise of Yum! Brands. Notably, KFC has also recently added premium-priced boneless chicken to its menu to help boost sales.

Birds of a feather

 

Sanderson Farms

Pilgrim's Pride

Tyson Foods

Market cap

1.67B

4.27B

11.51B

Qtrly rev growth (yoy)

0.12

0.04

0.07

Gross margin (ttm)

0.11

0.08

0.07

Operating margin (ttm)

0.08

0.06

0.04

P/E

12.75

9.95

15.80

Source: Yahoo! Finance 

Among the three poultry products producers, Sanderson Farms' menu may be more appetizing based on the metrics above. Its annual dividend yield of 1.2% is also among the best in its sector. In October, it declared a regular quarterly dividend of $0.20 per share, representing a new annual dividend rate of $0.80 per share. 

Poultry production has geared up
Sanderson Farms has also built the capacity to meet the anticipated rise in market demand. Its newest facility in Kinston, NC, set up in 2011, is ramping up to full production to support the output of its sister North Carolina plant and those in Mississippi, Louisiana, Texas, and Georgia. Bolstered by robust full 2013 results that further fortified its balance sheet, the company is likewise poised to start construction of a new production complex in Palestine, TX.

Additionally, Sanderson Farms' pricing power enabled it to increase its average sales price for poultry products by $0.075 per pound in its 2013 fiscal year, a 9.64% gain from 2012. This price increase contributed to an improvement in the company's operating margin to 7.67% in 2013.

Foolish recap
Rising demand for poultry products should benefit poultry product producers over the long term. The economic factor isn't the only driver for consumers' switch from beef to chicken; the trend is also driven by nagging health issues such as those being encountered by the fast-food industry. Also at play here are many authoritative health suggestions such as that of the American Heart Association for us to eat more chicken than beef. 

Arturo Cuevas has no position in any stocks mentioned. The Motley Fool owns shares of Sanderson Farms. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.