Healthy year ahead for chicken

Healthy year ahead for chicken

Higher beef prices should shift demand toward chicken and pork.

ALTHOUGH poultry prices are lower in 2014, the industry should see a profitable year thanks to lower corn prices and higher beef prices, according Dr. Paul Aho, economist at Poultry Perspectives.

For 2014, the year will start with the market starving for chicken, beef and even pork. There are signs that the economy is improving slowly, and demand for poultry is strong while supplies are low, Aho said.

"I expect a robust seasonal increase in the spring — not going up to the level of last year, but we do not need it to be in order to be profitable," Aho added.

Gary Lohr, president of Baseline Economic Systems, projected last November (Feedstuffs, Nov. 11, 2013) that chicken production in 2014 would increase 4-5%, with producers making 4-5 cents/lb. on production (Figure 1).

The U.S. Department of Agriculture projected overall poultry production to increase 3% for the year; however, the 3% gain predicted for the first quarter is not reasonable.

The Jan. 21 USDA National Agricultural Statistics Service (NASS) "Chickens & Eggs" report shows that broiler chicks hatched for December 2013 totaled 771 million, up 1% from the previous year. For January, eggs in incubators are up 2% from year ago, with a total of 625 million.

According to the NASS "Poultry Slaughter" report, the total preliminary liveweight for poultry in December was 4.71 billion lb., with young chickens totaling 4.11 billion lb. and mature chickens at 63.5 million lb. The average weight for young chicken slaughter was up 1% to 5.99 lb. from December 2012, and the average weight for mature chickens was also higher, at 5.43 lb.

For the next three months, poultry slaughter should rise 1% over a year ago, based on the chicks placed number in the weekly NASS "Broiler Hatchery" report. Add the 1% increase in slaughter weight, and first-quarter poultry production should show only 2% growth, Aho explained.

Aho forecasted poultry exports for 2014 at the same level as 2013. Compared to a few months ago, the international market is weaker, but the reason is unclear.


Retail outlook

With the exception of pork chops, consumers were willing to pay more for meat products in January than in the previous month, according to shopper data Oklahoma State University economist Jayson Lusk collected for the monthly "Food Demand Survey."

Shoppers were willing to pay 17%, or 33 cents, more for chicken wings. They were also agreeable to spending 3.5% more on chicken breast than in December.

Consumers surveyed expect higher beef, chicken and pork prices in the near future and anticipate buying more chicken and less beef.

If consumers actually follow through with their intentions to pay more, the increased spending on chicken wings will be a touchdown for poultry producers, with Super Bowl Sunday just around the corner.

In fact, the National Chicken Council (NCC) estimates that Americans will eat a total of 1.25 billion wings — or enough to put 572 wings on every seat in all 32 National Football League stadiums — during Super Bowl XLVIII.

In its "2014 Wings Report," NCC said the mythical "great wing shortage" of 2013 is over due to the increase in poultry production. NCC projected that about 4% more chickens were produced in 2013 than the previous year.

NCC also estimated that more than 13.5 billion chicken wings, or more than 3 billion lb., will be marketed in 2014.

Still, prices for breast meat, leg quarters and wings are moderately lower than a year ago. Breast meat and wings both hit $2.00 in 2013. Aho explained that prices will not return to that level in 2014, but with lower corn prices, the higher prices aren't necessary for the industry to make a profit.

"Record-high beef prices put a solid floor on chicken prices," Aho said. "I see deboned breast meat going up to a very profitable level this year, although much lower than last year."

After prices for wings reached $2.00/lb. early in 2013, the market settled down, but similar to breast meat, lower prices still can result in a profitable year in 2014.

"If we get $1.40/lb. for breast meat, $1.30/lb. for chicken wings and 45 cents/lb. for leg quarters, then the industry will be profitable," Aho said.

Last week, chicken market activity was slow to moderate, with reduced schedules due to extreme cold weather. Prices were steady to firm for wings and stable for dark meat for breast cuts.

The Georgia dock price held at $1.045/lb. on whole broilers last week, 5 cents higher than the same time last year. Breast meat was $1.755/lb., leg quarters were 50 cents/lb. and chicken wings were $1.30/lb.

Egg prices were 4-10 cents higher last week, depending on the region. Large-sized eggs were $1.16-1.20/doz. in the Northeast, $1.19-1.22/doz. in the Southeast and $1.12-1.15/doz. in the Midwest.

Overall, egg production was up 2% from a year ago, totaling 8.25 billion in December 2013, which included 7.19 billion table eggs and 1.06 billion hatching eggs. On Jan. 1, 350 million layers laid an average of 75.6 eggs per 100 layers, a 1% climb from January 2013.

Turkey production should also increase in 2014 due to lower feed costs, but processors still face losses (Figure 2).

The turkey market has held steady for the past several weeks, with demand and offerings light to moderate and no trading reported.

Last month, turkeys averaged 30.7 lb. per bird, which is down a bit from the previous year. The "Cold Storage" report showed that total pounds of turkey in freezers dropped 20% from December 2012 but rose 8% from last month.

Healthy year ahead for chicken

Market roundup

Driven by lower feed costs, the pork industry should begin a slow expansion, followed by more rapid growth in the second half of 2014, according to Purdue Extension agricultural economist Chris Hurt. In addition, the expansion should continue into 2015 if corn and soybean meal prices remain lower.

Production costs were estimated at $64 last year and are anticipated to be $56 for 2014, according to Hurt. That drop will net pork producers an estimated $27 per head this year, which is the most profitable they have been since 2005.

The NASS "Livestock Slaughter" report released Jan. 23 showed pork production at 2.07 billion lb. for December 2013, a 6% increase from a year earlier. The average weight was 7 lb. heavier, at 283 lb., than in 2012.

Hurt forecasted live hog prices to average $66/cwt. for 2014, with prices ranging from $69 to $71/cwt. in the second and third quarters.

The CME two-day lean hog index finally advanced at the end of last week after falling for six straight days.

A rise in pork cutouts as beef cutout prices slipped last Thursday suggested that meat demand has begun to shift from beef to pork, according to Farm Progress analyst John Otte.

The drop in beef cutout prices last week suggests that demand will not support the current record beef prices. At last Thursday's close, the Choice cutout dropped $1.50 to $238.55, the first time prices have declined since Jan. 8.

USDA reported that negotiated cash trade was primarily inactive on moderate demand in all feeding regions.

Traders were forecasting that USDA's Jan. 24 "Cattle on Feed" report would show fewer cattle on feed and smaller placements.

Volume:86 Issue:04

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