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Why Is Chicken More Expensive? Ask McDonald's

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#1 Hum

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Posted 29 August 2013 - 22:20

When McDonald’s (MCD) introduces a new menu item, the entire food industry feels it. The company added apples to its menu and became one of the country’s largest apple buyers. It put cucumbers on its new McWrap and now expects to buy 6 million pounds of cukes this year.

Now Mighty Wings are coming back. From Sept. 9 through November, McDonald’s is expected to sell a grand total of 250 million wings, and some analysts say McD’s wing-buying spree for this promotion last year drove up wholesale prices.

Wedbush analyst Nick Setyan says McDonald’s probably started stockpiling wings about 18 months ago, which diminished supply. In late 2011, the Georgia dock wholesale price of chicken wings started rising from 90¢ to more than $2 per pound earlier this year, an increase that got passed along at the supermarket. Prices have since fallen to about $1.46 per pound. Steyan believes it will be hard for McDonald’s to make wings a permanent menu item, as the company may have underestimated its own impact on the wing market.

It’s not just wings, either. The wholesale price of boneless chicken breast has climbed 24 percent since March, an increase Sanderson Farms Chief Executive Joe Sanderson Jr. attributes to rising demand from fast-food restaurants. McDonald’s, for instance, introduced the McWrap this spring.

Setyan cites avocados as another example of fast food’s impact on food prices.

McDonald’s declined to comment on any possible impact it’s had on food prices. Spokeswoman Ofelia Casillas says in an e-mail: “We manage our grocery bill like a portfolio and use a customized approach for every commodity. Commodities vary year to year and it is business as usual for us in that space.”

As it stands, wings are a volatile commodity. “Birds only have two wings, so there is already a somewhat limited supply,” says Tom Super, a spokesman for the National Chicken Council. Farmers typically raise chickens for breast meat, he said. “It is not economically feasible for companies to raise birds just for the wings.”

Wing prices typically start to rise during football season, beginning in September, and peak around the Super Bowl, Super says. While wing prices have come down from last football season’s high, the new season is just getting started.

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