Plan by McDonald's to use antibiotic-free chicken could prompt supply squeeze in the US

Chickens look out of a cage at a hatchery in Mangaon, south of Mumbai on Feb 2, 2015. McDonald's plans to phase out chicken raised with certain kinds of antibiotics at its 14,000 United States restaurants. -- PHOTO: REUTERS 
Chickens look out of a cage at a hatchery in Mangaon, south of Mumbai on Feb 2, 2015. McDonald's plans to phase out chicken raised with certain kinds of antibiotics at its 14,000 United States restaurants. -- PHOTO: REUTERS 

NEW YORK (Reuters) - A plan by McDonald's to phase out chicken raised with certain kinds of antibiotics at its 14,000 United States restaurants will put additional pressure on an already-stressed supply chain.

Antibiotic-free chicken currently accounts for a tiny portion of total US supplies, and an increasing desire on the part of consumers for more "natural" products has meant that demand sometimes exceeds supply.

Available product has been so tight that when six of the largest US school districts tried to make the switch to antibiotic-free poultry last year, chicken sellers such as Tyson Foods and Pilgrim's Pride Corp said they could not change their production systems quickly enough to meet the demand.

The decision by the world's biggest restaurant chain to jump into the fray seems likely to complicate things further, tightening supply and thereby raising prices, said Athlos Research principal Jonathan Feeney. "This is very likely to cause a disruption in McDonald's food supply and will likely raise operating costs for McDonald's franchisees," added Mr Richard Adams, a former McDonald's franchisee who now runs the consulting firm Franchise Equity Group.

One key impediment up to now in increasing supplies has been convincing livestock farmers and meat packers to switch to new farming practices that they fear could threaten their profit margins. Routine use of antibiotics can mean larger animals and less disease.

Chipotle Mexican Grill Inc has some of the restaurant industry's highest standards for antibiotic-free meats, but it has occasionally had trouble finding supplies.

From time to time, its popular burrito restaurants have had to hang signs alerting diners that it was unable to get antibiotic-free chicken, beef or pork.

McDonald's said on Wednesday it will eliminate from its menus chicken raised with antibiotics that are "critically important" to human medicine, but unlike Chipotle, it will continue to purchase chicken raised with ionophores, an animal antibiotic commonly added to feed.

QUICK CHICKEN, SLOW BEEF

Public health advocates cheered McDonald's chicken plans on Wednesday, but they also pushed the chain to go further.

Jonathan Kaplan, director of the Natural Resources Defense Council's food and agriculture program noted that McDonald's new antibiotic policy has a "disappointing loophole" in that it covers only chicken and only US restaurants.

He also would like to see the chain expand its policy to all meats. "Hopefully, chicken is just the start, the Big Mac and McRib may be next," he said.

Switching to antibiotic-free pork and beef would present even tougher challenges, however. Making adjustment to supplies is easier in animals that mature more rapidly. It takes only about six weeks to get a chicken ready for slaughter, while it takes four to six months to ready a hog for market and 18 months or more for beef cattle.

The company would almost certainly have difficult acquiring enough antibiotic-free beef, which is already in short supply, for its burgers.

Chipotle and CKE Restaurants each traveled to Australia to find theirs.

CKE Restaurants' Carl's Jr chain in December debuted a "natural" burger, from grass-fed cattle raised without antibiotics, steroids or added hormones, in its 1,150 US restaurants.

Mr Brad Haley, CKE's chief marketing officer, said the company would love to start selling similar burgers at its Hardee's chain, but the company finds itself asking: "Where's the beef?"

"I don't think there's enough for sizeable chains to move over in the immediate future," Mr Haley said. "There simply isn't enough all-natural beef."

Still, McDonald's told Reuters it will continue to "look at all aspects of food sourcing and our menu".