Since early February, China and many other countries around the world have imposed bans on American poultry products following a mild strain of avian flu that was found in several locations throughout the U.S. The ban left 16,000 metric tons of chicken feet stranded in mid-shipment.
In China, chicken feet are a common side dish and they're a big export for U.S. poultry producers. The ban has forced exporters to store, destroy, or divert the product to alternative markets, such as animal food processing plants, which pay 10% of what suppliers normally get selling to China.
All told, about 15% of U.S. poultry products are exported. That market has been significantly reduced by the continued worldwide ban, though, the European Union lifted its ban on U.S. poultry goods just this week.
And much to the chagrin of chicken farmers, skyrocketing grain prices have compounded their headaches. Soybean futures, for example, are trading at a 16-year high. It's harvest time in Brazil, but a recent strike shut down the country's largest grain port for five days. Grain haulers were backed up for more than 40 miles waiting to off-load their cargo. The supply-chain slowdown came on top of poor crop yields in both the U.S. and Brazil and strong demand for grains.
High grain prices mean high feed prices in a market with an already tight margin. It doesn't bode well for poultry producers. But there's one savior for chicken farmers: the Atkins phenomenon.
The diet craze has pushed up demand for poultry products sharply. Despite all the negatives in the poultry market, former Motley Fool Stock Advisor recommendation Sanderson Farms (NASDAQ:SAFM), along with Tyson Foods (NYSE:TSN), Pilgrim's Pride (NYSE:PPC), and Smithfield Foods (NYSE:SFD) have all experienced share-price boosts thanks to Atkins.
Is Atkins enough to sustain poultry producers through a paltry year? So long as the diet craze continues, but if the fad fails, it could leave producers searching for profits like chickens with their heads cut off.
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Fool contributor Mark Mahorney doesn't own shares of any companies mentioned.
