October 26, 2011

Declining US broiler production affected by several factors 

US broiler companies are expected to lower production in 2012 and the "magnitude of the decline will depend on a number of factors", according to the Livestock, Dairy, and Poultry Outlook report issued last week by USDA'S Economic Research Service.

The October 21 edition of the National Chicken Council's Washington Report said that any improvements in overall economic conditions and consumer confidence will help moderate downward pressure on broiler production from the higher grain prices, according to the ERS. From September 10 to October 8, the number of broiler chicks placed for growout has been 6% lower than in the same period in 2011. Over the last several months, the number of chicks placed has been declining compared with the previous year. This trend is expected to continue through the fourth quarter and into 2012, ERS said.

Analysing cold-storage holdings of broiler products at the end of August 2011, ERS explained that stock changes were strongly divided between higher inventory levels for breast meat and wings and lower holdings of most leg meat products. Breast meat stocks were up 46% from the previous year and wing stocks were 25% higher. These increases were offset by declines in stocks for leg quarters (down 24%), thighs (down 22%) and drumsticks (down 32%), according to the ERS report.

Changes in cold storage stock levels have been reflected in wholesale price changes. In the Northeast market, the wholesale price for boneless-skinless breast meat averaged US$1.31 per pound during September, down 22% from a year earlier, and the price for breast meat with ribs was down 17%.

Rising stocks for wings also put downward pressure on prices, with whole wing prices averaging US$1.09 per pound, down 15% from September 2010. The falling stocks for most leg meat products were also reflected in their prices. Prices for bulk leg quarters, boneless-skinless thigh meat and drumsticks were 31%, 32%, and 24% higher, respectively, than the previous year.

With broiler production and ending stock levels both expected to be lower in the fourth-quarter 2011, many broiler product prices are expected to gradually strengthen but much will depend on the health of the US economy, ERS said.