Poultry producers cashing in?

Poultry producers cashing in?

Although chicken production is constrained by reduced breeder flock, poultry producers will be profitable in 2014.

Poultry producers cashing in?
IN general, the poultry industry, like other protein species, is benefitting from lower feed costs and higher prices. Still, industry expansion for 2014 is not advancing as quickly as most market analysts had anticipated.

In April, corn costs were 23.8%, or $64.31 per ton, lower than in April 2013, while soybean meal prices were 18.6%, or $83.28 per ton, higher than last year, according to Iowa State University business analyst Maro Ibarburu and University of California poultry specialist Don Bell.

Relief appears to be on the way as planting intention reports revealed that U.S. farmers plan to plant 5 million more acres of soybeans than last growing season, totaling 81.5 million acres.

According to economist Dr. Paul Aho of Poultry Perspectives, soybean meal buyers should expect a difference of $100 per ton between the 2013-14 and 2014-15 crops. Aho forecasted soybean meal to cost $470 per ton this year, in comparison to $370 last year.

Ryan Turner, risk management consultant for FCStone LLC, told the Dairy Outlook Conference that chicken has a competitive price point advantage to beef and pork on the retail level. The spread between pork and beef has widened as the year has progressed (Figure).

"The absolute cheapest, most efficient feed converter and readily available protein source in the world is chicken," Turner said.

By and large, chicken prices have improved over the past couple of years, rising 60-62% since 2010. The seasonal increase in chicken prices for this year is just starting.

U.S. chicken production, in general, is constrained by a reduced breeder flock, and until recently, the breeding flock was older than normal, Aho explained.

At the halfway point of the year, the broiler industry has yet to make the expansion move analysts had expected, even with good domestic prices, lower feed costs and higher beef and pork prices.

Interestingly, the number of broiler chicks placed for growout is equivalent to 2013. Due to the slow pace, the U.S. Department of Agriculture put its 2014 production forecast at 38.233 billion lb., up 1% from 2013; at the start of 2014, USDA's production forecast was a more optimistic 3% bump from 2013. Analysts anticipate an increase in production for the last half of 2014.

Looking ahead into the summer, a period of high profitability is in store for chicken producers, Aho said. Moreover, if beef and pork prices continue climbing, the chicken industry should enjoy healthy returns for 2014.

 

Egg market

As with broiler production, the cost of production for laying hens is below last year. The simple average of five U.S. regions for the first four months of 2014 was 73.01 cents/doz., according to data Ibarburu and Bell compiled for an Egg Industry Center report.

The U.S. flock size in April was about 293.9 million head and was projected to reach 300.7 million head by the end of 2014. A slight increase is forecasted in 2015, at 302.3 million head.

Egg prices have been generally steady for producers over the past three months. The higher prices come at a good time as producers are incurring more costs to comply with California's new regulations for egg laying hens, which become effective in January 2015.

The U.S. producer price for unprocessed eggs in April 2014 was $1.13/doz. (Table). Ibarburu and Bell estimate prices to rise starting in late August until they reach $1.464/doz. in December. Next year, the price should taper off, with a projection of $1.30/doz. for January.

The strong prices are supported by healthy domestic and global demand. USDA projected annual consumption to increase by 3.6 eggs per person, which is the highest yearly increase in the last 15 years, the Egg Industry Center report states.

Although egg exports were down in April, USDA estimated that 256.0 million doz. will be shipped internationally in 2014, up 4.7 million from last year, and 257.1 million doz. will be shipped in 2015.

 

Projected U.S. producer prices for unprocessed eggs (12 months), all sizes

2014

Price, $/doz.

April*

1.131

May

0.881

June

0.899

July

0.973

Aug.

1.079

Sept.

1.087

Oct.

1.090

Nov.

1.400

Dec.

1.464

2015

Jan.

1.300

Feb.

1.177

March

1.331

*Actual price.

Source: Egg Industry Center.

 

Volume:86 Issue:26

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