HOW hot is too hot? Meat marketers might start pondering that question in relation to retail meat prices and how long consumers will continue to pay top dollar for steak and chicken breast.
Wall Street is certainly questioning if the rally in the chicken complex is over. Analysts following Pilgrim's Pride, Tyson Foods and Sanderson Farms have openly questioned how quickly the market has fallen for abundant leg quarters and breast meat.
Breast prices are still running well ahead of the five-year average but have fallen nearly 10 cents/lb. over the course of the past month, based on data from the U.S. Department of Agriculture's Agricultural Marketing Service.
The closure of the federal government for three weeks this month has delayed the availability of September retail meat price data from the Bureau of Labor Statistics (BLS), but August showed a high-water mark of $3.599/lb., a 6.8% premium to the August 2012 price. Average retail breast meat prices had climbed since February, according to BLS.
As the saying goes, of course, the only cure for high prices is high prices, and producers may be working on the cure by producing more chicken.
USDA released its monthly "Poultry Slaughter" report Oct. 24, indicating that ready-to-cook (RTC) volume was up 5% in September from the same month a year ago.
Processors handled 3.60 billion lb. of chicken last month, a stiff hike over last year. The National Agricultural Statistics Service (NASS) also revised its estimate of August production, increasing RTC by 477,000 lb. to 3.84 billion, or 2% smaller than the volume processed during August 2012.
The September tally accounted for 5% more chickens slaughtered and an average liveweight increase of 1%.
Birds are getting larger, and the industry is processing more of them, but questions are now being raised on whether the industry is bumping into the law of diminishing returns as it relates to liveweights. Keeping an eye on dressing percentages moving forward will shed some further light on the question.
Year to date, processors have harvested an additional 67,000 birds (up 1.05%) than the same period last year, but total RTC is up more than 3% to 28.58 million lb.
Look for chicken slaughter totals to continue running ahead of last year, at least in the short run. As feed costs have moderated, producers have ramped up production plans.
NASS reported Oct. 23 that the broiler-type egg set has run 2-6% ahead of last year for five of the previous six weeks.
For the week ending Oct. 19, the broiler-type egg set was 188,038 eggs, up 6% from the same week in 2012. Since mid-September, only the first week in October showed a smaller egg set than the comparable week in the previous year.
Placements, similarly, are running 1-5% larger. For the most recent week, placements were up 5% to 162 million chicks. Cumulative placements through Oct. 19 are up only 1%, but since mid-September, placements have averaged 3% larger than the reference week last year.
So, the question becomes, Are consumers going to start seeing bargains for chicken at the retail case? BLS won't release October retail price data until mid-November, so official estimates are still a couple of weeks away.
Analysts at BMO Capital Markets and Stephens last week questioned the robustness of the "chicken cycle," suggesting that retail prices are coming down. Those analysts differed, however, on what that means for the market, with BMO's advice to clients pointing out that poultry profits are going to be just fine as the drop in feed costs should more than offset any drop in prices.
Georgia dock chicken prices are still running more than 9% higher than last year despite having come down roughly 1.25 cents/lb. over the past month. Last week's dock price was $1.05, compared with 96 cents during the same week in 2012.
Boneless, skinless chicken breast prices dropped 7 cents last week to $1.875, and quarters finished the week down a half-cent to 52 cents/lb. Wings were down a penny over the course of the week.
That weaker undertone surfaced as offerings across the board were described as mostly moderate to heavy, with some discounting reported to help move product. The supply of wings, in particular, is pretty heavy, with prices drastically discounted at this point.
Turkey prices ran $1.03-1.11/lb. on a frozen, basted equivalent last week. Frozen demand was light to moderate, with most interest noted for deferred deliveries; looking toward November, fresh demand was described as moderate to good.
Slaughter last week was 2.8% smaller than the same week in 2012, with RTC volume coming in at 4.38 million lb.
The egg markets were mostly steady to firm last week, with New York prices climbing 2 cents/doz. and most regional prices holding pat. Midwest warehouse prices were $1.02-1.07/doz. for large and extra-large sizes.
The weekly shell egg inventory for Oct. 21 fell 4.1% to 1.025 million cases; the breaker inventory tallied 261,000 cases.