Wings and Things

Aside from oil, there are few commodities that have attracted as much attention as the various chicken products. The most prominent of which is eggs. Egg prices are volatile, and can rapidly shift based on supply and demand. But it is mostly a supply phenomenon. As the US was emerging from Covid, the US chicken flock was suffering from Avian flu and a forced culling ensued. 

The culling spiraled through numerous prices. Egg prices rocketed higher as did egg reliant products (baked goods and mayonnaise are a couple examples). It was not simply eggs, though. Chicken meat prices doubled as well.  

But chickens do not take long to replenish. It is a relatively short cycle from culling and high prices to (over) replenished and collapsing prices. Unlike cattle, high prices solve high prices. While different in magnitude, the charts of chicken wing prices from Toast and CPI readings are directionally similar. It is a stark example of how quickly the commodity side of pricing and inflation can change.  

Chicken – specifically wings – is also a noteworthy example of the differential between the inflationary stickiness of services and the volatility of commodities. Here is the breakdown – 

    • Recently Tyson chicken was offered at Kroger in buy one get one free packages. 
    • Tyson is selling a commodity with little pricing or brand power to maintain a pricing stance. 
    • Wingstop (and other wing and chicken focused restaurants) increased their prices during the chicken wing shortage. 
    • Those prices are being maintained and slowly creeping higher. 

One of those is the “chicken CPI” and the other is “food away from home”. Chicken CPI has been volatile and even periodically deflationary recently. Food away from home has only slow disinflated but remains fairly steady above 5%. That is a single example. But there are other places this has occurred as well. 

This may seem a rather academic exercise. But it has investable ramifications as well. Wingstop’s stock chart is basically the inverse of chicken wing prices. When the primary input cost is a commodity that plummets in price but there is pricing power, margins and earnings follow. Simply, the sticky parts of inflation are problematic for the FOMC and cutting rates. But they have been great for shareholders.  

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