Broiler production expanding as demand rises

Exports expected to rise 5% year over year in 2020 as trade relations with China improve.

Krissa Welshans, Livestock Editor

December 17, 2019

3 Min Read
Broiler production expanding as demand rises
Credit: buhanovskiy/iStock/Thinkstock.

Various indicators suggest plans for expanded broiler production in 2020, according to the U.S. Department of Agriculture’s “Livestock, Dairy & Poultry Outlook.”

According to USDA agricultural economist Kim Ha, the broiler-breeder-layer flock averaged 58.4 million in October, a 1.5% increase year over year, and is on track to exceed year-earlier inventories in the beginning of 2020. Furthermore, U.S. pullet placements point to producer intentions to continue expanding the layer flock at least into the second quarter, Ha added.

“Increased exports resulting from the opening of China’s market will likely help support producer margins, providing further incentives to expand production,” Ha said.

Based on expectations for a larger broiler-breeder-layer flock, USDA recently increased its 2020 broiler production forecast to 45.250 billion lb., a 3.2% increase from the year before.

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Regarding exports, USDA said broiler export volumes for October were estimated at nearly 651 million lb., a year-over-year decrease of 2.6%.

U.S. exports to Cuba decreased significantly in October by more than 17.5 million lb. relative to last year. Ha said the decrease likely reflects the impacts of Cuban foreign exchange shortages; to the extent that these continue, U.S. broiler exports to Cuba will remain relatively low.

However, the decline was partly offset by increased shipments to several other markets, including Vietnam (up 13.9 million lb.), Taiwan (up 7.7 million lb.) and Mexico (up 7.4 million lb.), among others, Ha noted.

While China formally announced that it has lifted its ban on U.S. poultry meat, Ha reported that only a limited amount of product has begun moving to China. The country has listed more than 170 U.S. plants approved for export to China and is in the process of approving cold storage facilities.

USDA’s 2019 fourth-quarter export forecast remains unchanged. In 2020, Ha said broiler sales to China will gradually ramp up as the U.S. and China finalize details, with a large share of growth occurring in the second half. The 2020 export forecast was increased to 7.425 billion lb., a year-over-year increase of more than 5%, if realized.

According to Ha, the increase in production will result in higher cold storage inventories in the near term and midterm. USDA’s October “Cold Storage” report estimated ending stocks at 918 million lb., 4.8% higher than the previous month and 1.1% higher than a year ago.

“With the exception of drumsticks and wings, stocks increased across all product categories relative to September. Given the expectation for increases in production in the fourth quarter, it is unlikely that inventories will liquidate by the end of the year,” Ha reported.

As a result, USDA revised the 2019 ending stocks forecast upward to 910 million lb. The expected increase in 2020 broiler production was also the basis for USDA increasing the 2020 ending stocks forecast to 910 million lb.

Price forecast revised downward

USDA reported that whole-bird (national composite) wholesale prices averaged 78.30 cents/lb. in November, about 10% lower year over year. However, Ha said prices began trending upward a few weeks earlier than seasonally expected and at a faster rate, which suggests that stronger-than-expected December prices may offset November prices.

Still, increased supply is expected to pressure prices in 2020, which led USDA to lower the 2020 price forecast to 89 cents/lb., fractionally above 2019.

Ha relayed that there has been a notable upward trend in weekly wholesale parts prices in recent weeks, which coincided with the announcement of China opening its markets to U.S. poultry meat and may be a reflection of expectations for increased exports. Wholesale prices for whole legs and leg quarters — which, for most of 2019, have been boosted by the increase in global demand for protein — were among these items.

Wholesale boneless skinless breast prices were also up — by 4.2% year over year — for first time since February 2019, averaging 88.86 cents/lb. in November.

USDA reported that from May 2018 to October 2019, boneless/skinless breast prices have been consistently below year-earlier prices (with the exception of February 2019), averaging a year-over-year decrease of 12%, but boneless/skinless breast prices continued to trend up in the beginning of December.

About the Author(s)

Krissa Welshans

Livestock Editor

Krissa Welshans grew up on a crop farm and cow-calf operation in Marlette, Michigan. Welshans earned a bachelor’s degree in animal science from Michigan State University and master’s degree in public policy from New England College. She and her husband Brock run a show cattle operation in Henrietta, Texas, where they reside with their son, Wynn.

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