Poultry laying the golden egg

Poultry laying the golden egg

As beef and pork prices reach new highs, poultry industry is in perfect position to increase production and gain retail market share.

Poultry laying the golden egg
POULTRY producers may have received the golden egg this year as the tight supplies that are driving beef and pork prices higher will cause consumers to rethink animal protein choices at the meat counter.

Still, persistently high soybean meal prices, a restricted short-term supply of chicken and soft demand to start the year may keep the industry from fully seizing the profitability opportunity available this year.

Dr. Steve Meyer at Paragon Economics Inc. told the National Pork Industry Forum that poultry producers have been growing the flock steadily since late August in anticipation of an excellent corn crop, but increased output from the larger flock has yet to materialize.

Although there are plenty of breeding animals, the problem has been chick livability.

"Looking at the ratio of placements to egg sets over the last six months, it has been very erratic and generally 2% lower than year ago," Meyer said.

At times, the broiler average hatchability rate has been as low as 81% (Figure).

So far this year, chick placement is only 1% higher than last year.

Meyer said estimates last summer pegged broiler production to be up 3% at the beginning of this year, but in reality, it is up just 1%. Still, there will be an incentive for the industry to ramp up production in the second half of 2014.

In January, real per capita expenditures for all meat and poultry declined 3.2% from a year ago, with chicken registering the largest decline, at 8.5%. Beef and turkey spending also dropped 4.8% and 4.4%, respectively. Pork showed the only increase, at 5.8%.

The downward trend is clearly a hazard of a persistently tough winter this year.

 

WASDE

In the March 10 "World Agricultural Supply & Demand Estimates" (WASDE) report, the U.S. Department of Agriculture lowered its forecast for total 2014 red meat and poultry production from last month.

With slow growth in eggs set and chicks placed, broiler production was lowered. Likewise, USDA reduced estimated turkey production as both January slaughter and hatchery data were below expectations. The egg production projection remained unchanged.

Since January, poultry exports have been higher than expected, so USDA increased its export forecast. Turkey and egg exports were not adjusted.

The projected price for eggs was raised on higher first-quarter prices, but broiler and turkey prices were unchanged.

USDA made a slight reduction of 0.3% for pork production given that porcine epidemic diarrhea virus (PEDV) will continue to strain supplies and pressure prices higher. As a result, USDA reduced forecasted pork exports and raised prices for hogs.

The 2014 beef production forecast in WASDE increased due to heavier carcass weights, first-quarter cow slaughter that surpassed expectations and relatively large cattle placements. Beef exports were also increased based on strong sales to Asian markets. Similar to pork, cattle prices were raised due to tight supplies and continued price strength for fed cattle.

 

Dairy

In the dairy industry, exports continued to steal the spotlight by reaching a new record high of $5.1 billion for 2013. Even though dairy imports also have grown, the U.S. dairy industry maintained its net exporter status last year. Many dairy products saw steady export growth in 2013, and the trend has continued in 2014.

According to dairy analyst Jerry Dryer, total dairy exports were up 17.8% on a volume basis, with cheese up 46% and milk powders up 22% in January.

The milk production forecast for 2014 was unchanged in the WASDE report, while fat-basis exports were raised due to increased sales of butter and cheese.

USDA forecasted all milk prices at $21.40-22.00/cwt. Based on strong demand, prices were higher for cheese, butter, nonfat dry milk and whey.

 

Market roundup

Elsewhere in the livestock and poultry markets, pork values continued to soar, smashing record prices, which left traders wondering where the breaking point is.

Wholesale pork cutouts started last week by breaking the record price of $111.33/cwt. set last June and continued their upward climb to close at $121.47/cwt. on Thursday.

Lean hog futures, for the most part, rose sharply every day but took a breather last Wednesday as prices for April and May dropped and June gained slightly. However, last Thursday, hog futures were up the limit at $118.82 for the April contract, and June set a new high at $127.60, driven by higher wholesale values and a lower inventory of market-ready animals.

Packers were bidding at the higher end of the spectrum as supplies are being choked by weather-related movement delays in the short term and the rise of PEDV losses in the long term. Last Thursday, the national average negotiated carcass price was $108.80/cwt. delivered to the eastern Corn Belt and $113.67/cwt. to the western Corn Belt.

The focus has turned to the March 28 "Hogs & Pigs" report for an indication of PEDV losses.

In the cattle markets, beef cutout values stalled last Thursday — Choice at $241.30/cwt. and Select at $236.87/cwt. — after steadily climbing all week, suggesting that the peak has been reached.

USDA reported that negotiated cash trade was mostly inactive last week. Farm Progress analyst John Otte said feedlots in Kansas and Texas passed on $146 bids.

CME Group announced an amendment to delivery specifications of Chicago Mercantile Exchange live cattle futures to allow for the delivery of heifers, pending regulatory review. The change is effective March 16 for trading March 17 and will begin with the August 2015 contract month, which was delayed until March 17 in order to incorporate this important change.

In the chicken markets, the Georgia dock price advanced to $1.05/lb., a continuation of record prices since mid-January. In general, prices are trending steady to higher for all white and dark meats, with light retail demand but moderate to good foodservice demand.

Breast meat was down marginally from the start of last week at $1.855/lb.; leg quarters traded at 50 cents/lb., and wings were $1.295/lb.

Egg market prices declined 12-17 cents in all regions. Large eggs were $1.32-1.36/doz. delivered to the Northeast, $1.33-1.36/doz. to the Southeast and $1.22-1.25/doz. to the Midwest. USDA reported moderate market activity for most regions, except the West Coast, which was slow to moderate. Supplies and offerings were light to moderate for immediate trade.

In the turkey markets, demand and offerings were light to moderate. Hens and retail-sized toms were steady last week and settled last Thursday at 97 cents to $1.08/lb. for hens and 99 cents to $1.06 /lb. for toms.

Dairy market demand, on the whole, was robust globally and domestically. An early price break in the first few weeks of February triggered impulse buying, with numerous plants in the Upper Midwest reporting being sold out, according to Dryer. Still, the milk supply should increase seasonally in the region.

Cheese prices last week were up 2.5 cents to $2.35 for 40 lb. blocks, while 500 lb. barrels were down 1 cent to $2.275 on Thursday. The spot price for butter held steady last week at $1.885/lb.

Volume:86 Issue:11

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