Broiler exports have benefited over the last several months from the decline in U.S. prices of most broiler parts. The recent reopening of the Chinese market to U.S. poultry products is expected to strengthen exports of U.S. broiler parts. Broiler prices are expected to gradually strengthen from their current lows over the next several months as slower production increases and stronger exports draws down relatively high stocks.

U.S. Broiler Production Lowered

Estimated 2005 broiler production was decreased by 100 million pounds to 35.1 billion pounds, as recent egg sets have been running considerably lower than earlier this year. The weekly broiler hatchery report continues to show increases in the numbers of broiler chicks being placed for growout. However, over the last 5 weeks (Nov. 6 through Dec. 4), the number of broiler eggs being placed in incubators has averaged 206.7 million per week, up less than 1 percent from the same period in 2003. This data for egg sets indicate that chick placements, on a year-over-year basis, can be expected to be considerably lower in the next several weeks after averaging 3 to 4 percent higher for most of the last 5 months.

U.S. broiler production in fourth-quarter 2004 is estimated at 8.6 billion pounds, 4.4 percent higher than in fourth-quarter 2003. Broiler production in October was 2.9 billion pounds, down 5.2 percent from a year earlier, as October 2004 had two less slaughter days than in October 2003. The loss of a slaughter day normally means close to a 5-percent drop in monthly production. November has two additional slaughter days compared with the previous year and should result in a double-digit increase in production. This follows a third-quarter where production increased 4.6 percent compared with a year earlier. The increase in production is expected to come from both higher numbers of birds going to slaughter and continued growth in their average weights.

Broiler Stocks Move Upward

As year-over-year growth in production has risen in 2004, stocks of broiler products held in cold storage have started to accumulate. The estimate of cold storage holdings of broiler products at the end of October was 796 million pounds, up 33 percent from a year earlier. Over the first 5 months of 2004 stock levels were below the previous year, but starting in June stocks have increased by over 40 million pounds.

With increases in production and growing amounts of product in cold storage, domestic broiler prices have declined. The November 12-city average for whole broilers was 68.1 cents a pound. This was still up 6 percent from the previous year, but prices have fallen around 14 cents a pound from where they were in June. Leg quarter prices were 30 cents per pound in November, slightly higher than the previous year, but leg quarter prices also have fallen since June (down 7 cents a pound). Broiler prices are expected to gradually strengthen over the next several months as lower production and stronger exports should result in stock reductions.

U.S. broiler exports in October 2004 were a record 568 million pounds, slightly less than 5 million pounds above the previous record set last October. This leaves exports for the first 10 months of the year at 3.85 billion pounds, still 6 percent lower than the same period in 2003. The quantity of broiler exports has benefited over the last several months from the decline in prices for most broiler parts. Shipments are also expected to strengthen over the next several months with the reopening of the Chinese market to U.S. poultry products.

Turkey Production Down, Prices Higher

In November, the price for whole turkeys (hens) in the Eastern region averaged 78.3 cents per pound, up 13 percent from the previous year. Wholesale prices for whole birds and parts are expected to decline slightly on a seasonal basis during the next several months, but prices for most turkey products are expected to be supported by the current low levels of cold storage stocks of turkeys (whole birds and parts). At the end of October, stocks of whole birds were 260 million pounds, down 21 percent from the previous year, and stocks of turkey parts were 230 million, 10 percent lower than last year.

Turkey production during the first 10 months of 2004 has totaled 4.5 billion pounds, down 4.9 percent from the same period in 2003. The decline in production has been the result of a smaller number of birds being slaughtered, as the average weight of birds has been slightly higher so far in 2004. Production over the next several months is expected to remain below the previous year. Over the last 6 months, (May through October), the number of poults placed for growout has only totaled 138 million birds, 4.7 percent lower than the same period in 2003.

U.S. turkey exports, after showing a 3.9-percent increase in the third quarter to 134 million pounds, fell somewhat in October to 43.3 million pounds, down 14 percent from the previous year. However, exports to Mexico continue to be strong. Shipments to Mexico were 26.8 million pounds in October boosting exports over the first 10 months of 2004 to 211 million pounds, 9 percent higher than the previous year.

Turkey exports in general, and exports to Mexico specifically may be pressured in the coming months by strong U.S. prices and the institution of an inspection fee by the Mexican Government. Prices for whole turkeys have shown double-digit gains compared with the previous year and prices are also higher for other turkey parts. The Mexican Government has announced the institution of inspection fees to help offset the cost of border inspections. The fees are expected to amount to approximately $450 per truck. This fee structure would more heavily impact items with a lower unit value, such as mechanically deboned turkey meat to be used in the Mexican food processing industry.

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