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Chicken production estimates raised

Chicken production estimates raised

Although USDA projects 2.9% more chicken to be produced in 2014, two economists think even more production is in store.

Chicken production estimates raised
FOLLOWING nearly two years of below-average inventories, the broiler-type hatching flock is showing signs of returning to a growth-oriented size.

With feed prices and chicken demand both favorable to profitability, breeders are increasing the number of hens in their operations, helping fuel a larger chicken production projection for 2014.

In its November "World Agricultural Supply & Demand Estimates" (WASDE), the U.S. Department of Agriculture pegged 2014 chicken production at 33.484 billion lb., up 2.9% from 2013. The market is certainly favorable to expansion, with corn prices down more than 50% and soybean prices down by a sharp margin as well.

Furthermore, record beef prices and steady demand for chicken at home and abroad mean that the opportunity to take market share from other competitive products is too good to pass up. How quickly producers will actually expand is still something of a question, however, as the industry has handled its business fairly cautiously throughout 2012 and 2013.

"To us, the USDA November estimate appears conservative," according to "Daily Livestock Report" economists Len Steiner and Steve Meyer. "Assuming a 1% increase in broiler weights, which is in line with long-term trends and the shift to marketing heavier birds, the production increase implies that the number of broilers coming to market in 2014 will increase by less than 2% compared to 2013."

In other words, the numbers don't quite add up. Based on the monthly USDA "Chicken & Eggs" report, the breeder flock as of Oct. 1 was 4.9% larger than it was at the same point a year ago, the third month in a row in which the flock has been at least 4.7% larger than the prior-year period (Figure).

"This would imply that the industry is gearing up for a notable increase in the number of birds coming to market in 2014," the economists concluded. "After all, the record supply of corn produced this fall will have to be absorbed somehow."

Year to date, chicken slaughter is running 1.24% ahead of last year, with more than 6.95 million head slaughtered. Weights have hovered near 6 lb. per bird in recent weeks, and the ready-to-cook volume through last Thursday has now crested 30 million lb., up 3.2% from the same period in 2012.

With larger volumes, of course, come lower prices. The Georgia Dock price for whole broilers has dropped 1.5 cents/lb. since Oct. 1, and prices for parts have dropped sharply: boneless/skinless breast meat prices are down 17 cents, leg quarters are down 3.5 cents and wings are down a whopping 23 cents.

The good news about lower prices is that they make U.S. chicken even more competitive overseas. According to UDSA's Economic Research Service, the U.S. is the world's second-largest broiler meat exporter, and exports have become a valuable source of income for the U.S. broiler industry.

In its November forecasts, USDA did raise the 2013 chicken export forecast slightly but left its 2014 forecast unchanged. Even so, the industry is poised to produce more chicken, and with larger production meaning lower prices, the prospect of more overseas sales is not out of the realm of possibility.


Turkey still struggling

While the chicken sector has the wind at its back, the turkey sector isn't feeling nearly so bullish yet. USDA lowered its turkey production forecast because prices were weaker than expected in the third quarter and smaller production is likely to persist into 2014.

In its monthly "Turkey Hatchery" report, USDA had turkey eggs set down 5% from last year, with net poult placements down a sharp 8%. Placements have followed typical seasonal trends but have run well behind last year in every month of 2013.

Despite slightly larger export expectations and smaller production, USDA did not change its current price forecast for turkeys. Prices last week continued to trend mostly in the range of $1.00-1.13/lb. on a frozen, basted equivalent basis.

Volume:85 Issue:47

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