That growth accelerated in January and led us to speculate that the industry was positioning itself to set (ie. place in incubators) significantly more eggs as soon as managers were confident that feed prices would not continue at the drought-driven high levels of 2012 and 2013. The hatchery flock has continued to grow and reached 53.46 million birds as of 1 June. That is nearly 800,000 (1.5 per cent) more than last year and is the largest flock since August 2011. The broiler breeder flock has been over 1 per cent larger than one year ago in every month this year except May when it was only 0.9 per cent larger than in ‘12.

But a larger breeder flock translates into more chicken products only after fertile eggs are produced, set and hatched and chicks are placed into grower facilities and, finally, harvested. As can be seed in the chart at right, egg sets have ran higher than one year earlier in all but one week so far in 2013. But the increases were never what we would call large until June. The largest year-on-year increases were 2.2 per cent in two separate weeks back in February. Through the end of May, year-to-date egg sets were up only 1.1 per cent. One reason for the lack of growth was shipments of fertilized eggs to Mexico to backfill the losses suffered there as a number of flocks were destroyed to control avian influenza.

But things have changed since then! For the five weeks ended 6 July, US broiler companies have placed 1.01 billion eggs, 2.9 per cent more than one year ago. The first of those chicks have already hatched (the incubation period for a chicken is 21 days) and have been in grower facilities about two weeks. The first of those birds will reach market weight in another four weeks so higher chicken production is on the way.

An initial reaction to the higher year-on-year numbers of the past few weeks might be “Well of course, the corn crop was already deteriorating last year and companies were cutting back!” But a quick study of the chart says last year’s reductions were quite normal as broiler egg sets normally decline pretty sharply in June. This year’s steady weekly sets since mid-May actually show a counterseasonal increase in sets that should ultimately result in a counterseasonal increase in chicken output come late July and August.

This isn’t rocket science. A quick perusal of the Production and Price Summary table below shows that last week’s national composite broiler price $101.63/cwt. was 22 per cent higher than one year ago. The Georgia dock price of $105.99/cwt. was almost 13 per cent higher. Both, of course, have been strongly supported by a huge increase in boneless, skinless breast prices. Last week’s $182.61/cwt. is roughly $20 below the May peak but is still nearly $45/cwt. or 32 per cent higher than one year ago.

While the revenue side has been great, we think the biggest "late-breaking" development that has pushed egg sets higher is the fact that this crop still looks good. Broiler companies were positioned to grow as soon as they were confident that feed prices would be below the record levels of the past crop year. This year’s delayed plantings likely pushed such decisions further into the summer than would have been preferred but continued strong crop condition ratings have apparently outweighed most concerns about crop development and weather risk. Companies had the chance to lock in new crop corn on the Board in the low $5.00 area and could have priced soybean meal on the Board in the mid-$300s during May. Both would represent substantial cost reductions relative to last year and, when combined with current revenues, be quite conducive to expansion.