After a challenging finish to last year, conditions for US chicken processors could improve as 2026 unfolds, with signs that production growth may be more restrained than previously expected. A recent outlook from investment firm Stephens Inc. suggests that capacity constraints upstream may limit how quickly output can expand, potentially easing pressure on margins.
According to the firm’s analysis, hatchery capacity appears to be tighter than in recent years, a factor that could keep production growth at more moderate levels in 2026. This comes after a period in which strong supplies weighed heavily on processor profitability, particularly toward the end of 2025.
Fourth-quarter results highlighted the impact of those dynamics. Chicken processing margins fell sharply as seasonal demand weakened and product availability remained ample. Federal slaughter data showed that chicken production by weight rose 3.2% compared with the same period a year earlier. That increase reflected both a higher number of birds processed, up 2.1%, and modestly heavier birds, with average weights increasing by 1.1%. At the same time, pullet placements through November were running about 1% below the prior year, hinting at some moderation in future supply.
Despite the late-year downturn, Stephens expects margin conditions to improve as the year progresses. The firm anticipates a recovery to above mid-cycle margin levels by the second quarter, a period that typically coincides with peak seasonal demand for chicken. Early-year price trends are supporting that view, with chicken prices beginning to firm again as the new year gets underway.
Taken together, the combination of slowing production growth, early signs of stronger pricing, and the approach of the seasonally strongest demand period suggests that the pressure on chicken processors seen late last year may not persist deep into 2026.
