TOTAL poultry production in November fell roughly 2% from last year to hit 3.49 billion lb., according to the latest "Poultry Slaughter" report from the U.S. Department of Agriculture.
Ready-to-cook (RTC) chicken volume, however, was more or less steady on the year at 3.0 billion lb., down less than 1% from November 2012.
When considering that November 2013 featured one less production day and one additional Saturday, the difference in production may well be a function of the calendar than any actual shift in production capacity.
Year to date through November, USDA reported total RTC chicken volume of 35.2 billion lb., up roughly 2% compared with the first 11 months of 2012. Given improvements in feed costs and profitability, producers were expected to expand production, with the Economic Research Service (ERS) forecasting total fourth-quarter production of 9.5 billion lb., 3% larger than the previous year.
Digging into the data, USDA reported that November slaughter inspections included 3.94 billion lb. of young chickens, down 2%, and 55.7 million lb. of mature chickens, down 7% from last November.
In its most recent outlook, ERS noted that USDA did lower its estimate for fourth-quarter production by 25 million lb. "as the number of chicks being placed for growout has been slowing in recent weeks."
The current fourth-quarter estimate is still 3% larger than in fourth-quarter 2012 and would place the total for 2013 at 37.8 billion lb., an increase of 2% from year-ago levels. October was a record-setting month: It was the first time in history that the average monthly liveweight at slaughter topped 6 lb. per bird.
November continued that trend, with an average liveweight of 6.01 lb. per bird, up 1% from last year, so while fewer birds were inspected, producers are clearly happier feeding birds more of this year's cheaper corn and soybean meal than they were feeding record-high-priced ingredients last year.
"The forecast of relatively lower prices for both corn and soybean meal in the remainder of 2013 and into 2014 is expected to give broiler integrators incentive to continue expanding production even though prices for a number of broiler parts have been declining in recent weeks," ERS economist Kenneth Matthews wrote in mid-December. "The number of chicks being placed for growout continues (to be) higher than the previous year, but in the last several weeks, the numbers have been moving closer to year-earlier levels."
Matthews pointed out that over the previous five weeks (Nov. 9 to Dec. 7), the number of chicks placed for growout averaged 158 million, up almost 2% from the same period in 2012. The number of chicks being placed for growout in October had been averaging closer to 3% above the previous year.
Even so, he said chick placements for growout are expected to remain above year-earlier levels throughout 2014 as lower grain prices are expected to encourage broiler integrators to expand production (Figure 1).
In the November "Chickens & Eggs" report, USDA reported that the number of broiler-type chicks hatched last month was up 2% from November 2012, with the number of eggs in incubators up 1%.
Since June, the number of chicks hatched each month has been larger than a year earlier on a monthly basis, and Matthews said the year-over-year growth in the number of chicks hatched is expected to continue as the number of broiler hens in the hatching flock has been higher than the previous year.
USDA reported in November that breeders placed 7% more broiler-type pullet chicks into production for future domestic hatchery supply flocks, underscoring the assumption that expansion is happening and will be happening for the foreseeable future.
Chicken prices have held relatively steady over the past month, although the price for some parts has moderated considerably compared to the near-record prices of earlier in the year. Whole-bird prices, as measured by the Georgia dock price, are still 7-8 cents better than last year, and breast prices continue to be very strong, historically speaking.
In its December "Cold Storage" report, USDA indicated that frozen chicken stocks as of Nov. 30 were up 2% from October and up 7% from the same date last year. Additional supplies should pressure prices somewhat, although solid retail demand and an assumption that consumers will rely on budget-friendly breast meat to take the place of high-priced steaks and pork chops should keep producers firmly in the black throughout the next year.
Leg prices are down roughly 3% on the year, and wing prices — which had been priced well above historical norms — are down almost 35% compared with November 2012.
Exports continue to play a key role in the profitability of the U.S. meat-producing industries, with exports of poultry meat now accounting for about 20% of total production.
In the U.S., of course, breast meat is in high demand, while in many foreign markets, other portions of the chicken, particularly leg quarters and feet, are in more demand due to taste preferences or their relatively low cost. Another growing segment of the broiler export market, however, has been fresh parts, which are shipped primarily to Canada and Mexico (Figure 2).
While chicken production is up and probably increasing still, turkey production is a different bird entirely. November slaughter inspections totaled 597 million lb., down 7% from last year, which yielded 478 million lb. of RTC product, down nearly 8% year over year.
That followed a sharply lower production total in October, which was down 11% from the previous year at 517 million lb.
Producers are feeding fewer birds, and they are sending lighter birds to slaughter as well, with November slaughter weights down 1% from last year, at 28.6 lb. per bird.
"Lower turkey meat production has caused cold storage holdings of whole birds (especially hens) and parts to decline," Matthews noted in his December outlook. "This has resulted in increased prices at the wholesale level for a number of turkey parts."
Indeed, USDA's cold storage data released last week showed turkey stocks down 14% from year-ago levels. The 219 million lb. of product in commercial freezers represented a 50% drawdown from the previous month, although a sharp drawdown from October to November is typical given the turkey-centric Thanksgiving holiday.
However, November marked a fourth consecutive month of smaller year-over-year production in the turkey sector. Even so, while the cumulative number of turkeys slaughtered over the first 10 months of 2013 was down 4.3% from the same period in the previous year, a 2% gain in average weight for the period has offset almost half of it, meaning November's drop in liveweights is perhaps nothing more than a seasonal aberration.
Over the first 10 months of 2013, turkey poults placed for growout totaled 218 million, down 9% from the same period in 2012. In October, the number of poults placed for growout was 8.5% smaller than the previous year, and November placements were down 14% from the same month in 2012.
Producers have clearly responded to the red ink coloring their ledgers, and the significantly fewer pounds of production, coupled with far more favorable feeding margins, should push the industry closer to some semblance of balance in 2014.