July 5, 2012

 

US broilers expected to be affected by price pressure

With the USDA's revision of its outlook for broiler production and stocks, US broiler parts prices are expected to be affected by downward price pressures in the coming months, according to USDA's Economic Research Service.

 

For both the second and third quarters of 2012, US broiler production was revised upward as the decline in eggs set diminishes and weights continue to increase, stated the June 29th edition of the National Chicken Council's Washington News. The second-quarter estimate was increased by 200 million pounds to 9.3 billion pounds, and the third-quarter estimate was increased by 100 million pounds, also to a total of 9.3 billion pounds.

 

The 2012 estimate was increased to 36.9 billion pounds, down 0.8% from 2011. Increases in broiler-meat production in the second and third quarters are expected to come from a higher number of birds slaughtered than originally expected by ERS combined with higher average broiler weights. The average meat yield per broiler during April this year was 4.38 pounds, up 1.2% from April 2011, ERS noted.

 

In the second half of 2011 and through the first quarter of 2012, lower broiler-meat production, along with strong exports, resulted in declining frozen product inventory levels. In the coming months, broiler stock levels are expected to increase to accommodate increases in production estimates. Forecasts for the second-, third-, and fourth-quarter 2012 ending stocks were increased by 25 million pounds. Regardless, ending stocks are expected to be less than the previous year until fourth-quarter 2012.

 

The report added that wholesale prices for many broiler products peaked a week or two before Memorial Day but slipped since then. Prices for broiler products during May were higher than the previous year, but the difference was smaller than at the beginning of 2012.

 

In January 2012, wholesale prices for broiler wings were 69% higher than the previous year. But by May, wing prices had only fallen by 7% per pounds from their January peak and were 120% higher than in May 2011.

 

Dry conditions are spreading to the North and West and expanding in the Southeastern US, causing consternation among crop and livestock producers as far north as the Corn Belt and increasing the flow of lighter cattle off pastures, ERS reported. Drought-induced feeder cattle exports from Mexico are entering the US at a higher rate than they were at this point in 2011.

 

Weekly estimates of federally-inspected other (beef) cow slaughter, although well below 2011 levels over-year, have also increased from mid-April lows, ERS said.

 

Analysts predict that for 2012, hog slaughter will likely increase almost 2% with dressed weights higher than last year. Both of these factors contribute to a 2012 commercial pork production forecast of 23.4 billion pounds, almost 2.7% above production in 2011.

 

Second-quarter average prices for live equivalent 51-52% lean hogs are expected to be US$59-US$60 per hundredweight, almost 14% below the same time last year. For 2012, the expected average hog price is US$59-US$61 per hundredweight, almost 9% below 2011.

 

Pork exports should remain strong for three top US markets. Mexican demand for US pork is robust and likely reflects the tight Mexican feed grains balance sheet. Regarding Russia, continued trade disputes with Brazil are likely a factor driving Russian demand for US pork. Chinese imports of US pork products in April were almost three times higher than one year ago.