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broiler chickens Credit: buhanovskiy/iStock/Thinkstock.

Poultry industries on firm economic footing at midyear

Chicken producer margins continue to be supported by strong wholesale prices in parts segment.

The chicken and turkey industries are in a much better place financially than a year ago as the second half of 2019 gets underway, according to the Livestock Marketing Information Center (LMIC).

“Consumer demand for their products is improved, supported by impressive growth in consumer spending at restaurants and grocery stores,” LMIC said.

Rising prices for pork and hamburger raw materials at the wholesale level during the first half of the year are adding to the incentives to market more chicken and turkey products, according to LMIC, which “has been most notable for chicken legs, thighs and wings, as prices for these items at the wholesale level are up dramatically from a year ago.”

Chicken production for the first half of 2019 rose 1% from a year earlier. LMIC said expectations at the beginning of 2019 were for production to be unchanged, but wholesale prices for wings went from $1.50/lb. at the start of the year to $2.00 to close out the spring quarter. Normally, prices for wings decline from the start of the year to midyear, the center explained.

Further, legs went from close to 40 cents/lb. at the start of the year to a second-quarter average of 60 cents. What is even more remarkable, LMIC said, is that the price increases were achieved when exports -- the primary market for legs -- were up only 1% during the first half of the year compared to the same interval in 2018.

“This implies that the price increase was driven by domestic interest instead of overseas buyers,” LMIC explained.

The U.S. Department of Agriculture reported that, despite lower prices in the whole bird segment — wholesale prices were nearly 7% lower in July than the previous month, at 88.24 cents/lb. — producer margins continue to be supported by strong wholesale prices in the parts segment. With the exception of breast prices being down 12.7%, all other product categories continue to outperform year-earlier prices as well as historical averages, including whole legs (up 33.1%), leg quarters (up 31.3%), drumsticks (up 9.5%), thighs (up 32.5%), boneless/skinless thighs (up 9.2%) and wings (up 36.7%).

Prices for dark meat products continue to be supported by strong global demand stemming, in part, from African swine fever, USDA reported.

Regarding turkey, LMIC said signs of a domestic demand revival for turkey have been somewhat muted compared to chicken but are still encouraging relative to the conditions the industry has faced in the last two years.

Consumption slipped 1% from a year ago in each of the first two quarters of 2019 versus a year earlier. Prices for whole birds and breast meat at midyear were up about 10% from a year earlier, allowing the industry to attain modest profitability for the first time since the 2016 holiday season.

An emerging bright spot for the turkey industry is a recovery in exports, with second-quarter exports up 13% from a year earlier, LMIC said.

Market recap

October live cattle futures contracts were higher Monday but couldn’t sustain the gains. Contracts closed higher Monday at $101.00/cwt., fell Tuesday and Wednesday but then closed higher Thursday at $99.80/cwt.

September feeder cattle futures followed the same trend, with contracts closing higher Monday at $134.375/cwt. and Thursday at $133.40/cwt. after losses on Tuesday and Wednesday.

Beef cutout prices were slightly lower this week. The Choice cutout closed higher Thursday at $232.19/cwt., while Select closed lower at $212.78/cwt.

October lean hog futures posted strong gains this week. Contracts closed higher Monday at $63.80/cwt. and rose to $64.90/cwt. by Thursday’s close.

The pork cutout was mostly lower this week, with the wholesale pork cutout closing at $71.56/cwt. Loins were higher at $69.84/cwt., while hams were lower at $56.70/cwt. Bellies continued to plunge this week, closing lower at $106.32/cwt.

Hogs delivered to the western Corn Belt were lower, closing Thursday at $57.88/cwt.

The U.S. Department of Agriculture reported the Eastern Region whole broiler/fryer weighted average price on Aug. 23 at 80.91 cents/lb.

According to USDA, egg prices were steady, with a steady undertone. Offerings were light to moderate. Demand was moderate to fairly good.

Large eggs delivered to the Northeast were sharply higher at $1.07-1.11cents/doz. Prices in the Southeast and Midwest were also higher at $1.10-1.13 cents/doz. and 99 cents to $1.02/doz., respectively. Large eggs delivered to California were $1.59/doz.

For turkeys, USDA said the market was steady to firm, and demand was light to moderate. The price range for hens and toms was slightly higher on the lower end of the range, at 87-95 cents/lb.

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