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CME: Turkey Hatchery Output on the Rise

23 May 2016

US - The USDA-NASS released data earlier last week showing turkey hatchery output is on the upswing, write Steve Meyer and Len Steiner.

April turkey poult placements to growout farms were up 6 per cent from twelve months earlier.

March placements were up 3 per cent from a year earlier, a 2 per cent upward revision from the initial estimate made in April.

Turkey eggs in incubators at the beginning of May were up 5 per cent from May 1, 2015. The estimate of eggs in incubators on April 1, 2016 was adjusted upward 4 per cent.

Poult placements during January-March were up 1 per cent and expectations for poult placements this quarter are pegged at a 4 per cent rise. Summer quarter poult placements should continue the trend, with a 5 per cent gain in the forecast.

These increases are mostly the result of poult placements that were reduced by High Path Avian Influenza (HPAI) during the middle two quarters of last year.

Poult placements in the next six months will still run below the pace of hatchery output during the same months of 2014. A concern for the turkey industry is the lack of expansion in domestic consumption, as well as exports that were down sharply from a year ago during the first quarter.

Domestic consumption during the January-March quarter was up 2 per cent from a year earlier. Exports were down 25 per cent on the same basis of comparison. Consequently, inventories of turkey in cold storage on April 1 were up 22 million pounds from a year earlier. Frozen inventories at the start of the year were up 8 million pounds.

Turkey exports are expected to run above year earlier volumes this spring as year ago exports declined as turkey importing countries restricted US turkey product buying in response to the HPAI outbreak.

So far this spring, there has been no significant re-occurrence of the disease in the US, making trade restrictions a non-issue. Turkey exports this spring may be up 10 per cent from a year ago.

An emerging issue for the turkey industry will be the effect that high wholesale turkey prices during the first half of the year will have on domestic turkey consumption in the second half of the year, especially Thanksgiving and Christmas.

Significant amounts of product are contracted for these events during the first half of the year and whole bird prices are 15 per cent higher this year than during the prior two years (and those prices were considered high at the time). Meanwhile, the primary competing meat product, hams, are being priced slightly lower than the first half of last year.

This raises the risk that turkey consumption late this year could fall short of the clearances that were registered in the last two years, or trigger counter-seasonal wholesale turkey price declines beginning in the late summer to resurrect better holiday demand. There would be implications for late year pork demand with this scenario, also.

The 3 per cent and 6 per cent increases in hatchery output during March and April, respectively, simplistically translate into similar gains in production during June and the early summer months.

Average turkey weights at time of processing last summer were 3 per cent lighter than the prior summer, and a rebound should be expected this year, which would supplement the additional 3 per cent-6 per cent birds being processed.

Matched up against static turkey consumption trends, frozen turkey inventories during the summer months could bulge. Exclusive of the impact of HPAI last year, turkey mortality in grow-out facilities was very limited last year and a return to typical mortality would offset some of the efforts to increase production this year. 

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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