Despite high optimism in the broiler industry the beginning of the year, market disruptions caused by COVID-19 and economic uncertainty have significantly affected expectations for broiler production, prompting a downward revision to the production forecast, U.S. Department of Agriculture economists noted in the latest “Livestock, Dairy & Poultry Outlook.”

“First and foremost, demand from the food service industry has declined sharply as restaurants and hotels have been shut down due to COVID19-related stay-at-home measures. While retail demand is likely to remain strong as consumers prepare more meals at home, it is unlikely that it will make up for the lost foodservice demand,” USDA economists Kim Ha and Grace Grossen noted.

Also, since a significant share of large-bird production is marketed for foodservice, producers have begun scaling back their big-bird programs by harvesting large birds before they reach market weight.

“To the extent this practice is adopted and large-bird production is reduced, it is likely that average live weights will be lower than year-earlier levels in the coming months,” the report said.

The outlook further relayed that producers have also begun scaling back egg sets. After 17 weeks of year-over-year gains ranging from about 3% to more than 7%, egg sets for the week of April 4 were less than 2% higher than the previous year. Growth in chicks placed in growout flocks have also slowed, from an average of about 3% in March to less than 1% in the first week of April.

Ha and Grossen pointed out that the processing sector is also adjusting plant-level operations in response to COVID-19.

Based on all of these factors, USDA revised its 2020 production forecast downward to 45.160 billion lb., although that is still 3% higher than 2019 production.

According to USDA, weekly wholesale whole-bird prices (national composite weighted average) trended upward in March, consistent with seasonal patterns, but decreased counter-seasonally during the first two weeks of April. This dramatic decline in prices, USDA said, likely reflects the impact of decreased demand from foodservice combined with relatively high levels of broiler supplies.

As such, USDA lowered its 2020 price forecast to 74 cents/lb., down 17% year over year.

On the export side, although broiler exports had been higher to start the year, the expectation for challenging global economic conditions due to COVID-19 led USDA to reduce its 2020 export forecast to 7.230 billion lb., about 2% higher than 2019 exports.

While shipments to China have been increasing steadily, the economists noted that it is uncertain whether the Chinese market will be enough to make up for decreased exports to other markets.