Consider the following discussion. ${ }^{63}$
It has been a tough year in the poultry business, with supply outpacing demand and feed-grain prices rising substantially. But producers are hoping all that changes when the summer cook-out season starts.
The seasonal upswing in chicken consumption, along with the anticipated jump in spot-market poultry prices, could bring some relief to producers whose profit margins have been slashed by surging corn and soybean-meal costs.
Rising feed-grain prices, accelerated by the diversion of corn to make ethanol, have pushed up the cost of producing a live chicken by as much as 65 percent over the past two years.
Three factors make analysts more optimistic:
Companies are cutting production, weekly egg-set numbers are declining (egg sets are fertile eggs placed in incubators), and prices are responding positively to the decreasing supply.
The production slowdown is a response to the surge in feed-grain prices last fall.
Profit margins at producers will not improve unless spot-market prices for chicken move up fast enough to cover costs paid for corn and soybean meal to feed chicken flocks. Production cutbacks and seasonal demand have helped fuel a 20 -cent increase in boncless, skinless breast-meat prices to $$\$ 1.46$$ a pound. Prices are expected to reach at least $$\$ 1.80$$ by summer 2008 .
a. Use demand and supply analysis to illustrate the changes in chicken prices described in the above article.
b. Describe what has happened in the corn and soybean-meal markets and how that has influenced the chicken market.