Summary

Beef/Cattle: Drought continues to dominate non-fed slaughter, despite recent rains that provided temporary relief and promoted emergence of winter wheat in the Southern Plains. One result of the continuing drought is that proportionally heavy cow and bull slaughter rates and declining supplies of Choice-grade cattle have decreased the relative supply of Choice beef and contributed to a widening spread between Choice and Select steer and heifer cutout values. Wal-Mart’s decision to sell Choice beef has also contributed to the demand for Choice beef.

Beef/Cattle Trade: US beef exports are 27 per cent above a year ago and growth in exports is expected to continue into 2012. Cattle imports from Mexico were 25 per cent higher, through September, but were offset by the 40 per cent decline in cattle imports from Canada.

Pork/Hogs: Strong foreign demand for US pork products will support hog prices for the balance of the fourth quarter and keep retail pork prices at unusually high levels well into 2012.

Poultry: Broiler meat production in fourth-quarter 2011 is forecast at nine billion pounds, down five per cent from the previous year. For 2011, broiler meat production is forecast at 37.3 billion pounds, one per cent higher than in 2010. Broiler meat production is expected to decrease to 36.7 billion pounds (down 1.7 per cent) in 2012 due to high prices for both corn and soybean meal and a very slow-growing economy. Turkey meat production in fourth-quarter 2011 is expected to total 1.5 billion pounds, marginally higher than the previous year. Turkey meat production in 2011 is forecast at 5.8 billion pounds, up 2.9 per cent from 2010. Wholesale prices for whole hen turkeys in fourth-quarter 2011 are expected to be $1.08-$1.12 per pound, six per cent higher than in fourth-quarter 2010 and up 35 per cent from fourth-quarter 2009.

Poultry Trade: Broiler and turkey shipments in September 2011 rose from a year earlier. Broiler shipments totalled 637 million pounds, a 3.1 per cent increase from September 2010 shipments. Turkey shipments totalled 58.8 million pounds, an 18 per cent increase from last year.

Dairy: Milk production is forecast to rise in 2012, albeit at a slower rate than in the last two years. The dairy herd will be slightly smaller in 2012 but increased milk per cow will boost milk production above 2011. Higher availability of dairy products worldwide combines with additional US supplies to pressure product prices next year.

Poultry Production

Broiler Production to Decrease in Fourth Quarter

Fourth-quarter 2011 broiler meat production is forecast at 9.0 billion pounds, 5.1 per cent below that of a year earlier. The lower fourth quarter production is expected to be driven by sharp declines in the number of birds slaughtered but these declines are expected to be somewhat offset by an increase in average live weights. Over the last several weeks, preliminary slaughter data show a lower overall number of broilers slaughtered driven by reduced numbers of lighter birds, pointing toward higher average weights.

Broiler meat production in third-quarter 2011 was 9.53 billion pounds, 0.3 per cent above the same period in 2010. This increase was the result of a three per cent rise in average live weights, to 5.80 pounds. The increase offsets a decline of 2.9 per cent in the number of broilers slaughtered.

Broiler meat production in 2012 is forecast at 36.7 billion pounds, a decrease of 1.7 per cent from 2011. The decline in broiler meat production is expected to come mainly from a lower number of birds slaughtered, as bird weights are expected to be close to or slightly higher than in 2011. Broiler integrators are not expected to have any strong incentive to expand production, due to the combination of continued high prices for corn and soybean meal and relatively low broiler product prices at the wholesale level. Demand growth will likely be dampened by relatively slow economic growth and continued high unemployment.

The most recent weekly broiler hatchery report showed that over the last five weeks (8 October to 5 November), the number of chicks placed for grow-out averaged 7.9 per cent lower than in the same period in 2010. This five-week moving average has become more strongly negative over the last several months. The number of chicks placed for grow-out is expected to remain well below year-earlier levels through the remainder of 2011 and into 2012, but gradually to become closer to year-earlier levels in mid-2012.

Third-Quarter Ending Stocks Lower

Even though broiler meat production rose slightly in third-quarter 2011, ending cold storage holdings of broiler products totaled 645 million pounds, down 4.9 per cent from the previous year and down 71 million pounds from the end of the second quarter. With the exceptions of breast meat and drumsticks, cold storage holdings were lower for all other categories. Holdings of leg meat products were down sharply, with stocks of leg quarters at 87 million pounds, 29 per cent lower than the previous year. Stocks of leg quarters have moved lower over the last four months as the export market has strengthened. Cold storage holdings of legs, thighs and thigh meat were also down from the previous year. Stocks of wings totalled 52 million pounds at the end of third-quarter 2011, eight per cent lower than a year earlier. Over the last two months, stocks of wings have fallen by almost 21 million pounds. Stocks of whole birds are also down from the previous year, although this decline was not reflected in whole bird prices, which declined in September.

With broiler meat production up slightly and most of that growth coming from heavier birds, prices for a number of broiler products have been under downward pressure. Prices for whole birds are the hardest to explain, as those prices have moved lower even as the number of birds slaughtered fell and the cold storage holdings of whole birds were lower at the beginning of October. In October, the 12-city price for whole birds had fallen to 73.7 cents per pound, down over eight per cent from the previous year and about seven cents per pound lower than in August. After rising in September, prices for boneless/skinless breast meat fell to $1.21 per pound in October 2011, down almost 10 per cent from the previous year. Reflecting generally reduced cold storage holdings, prices for leg meat products were all considerably higher in October than the previous year. Prices for whole wings in the Northeast market averaged $1.20 per pound in October. While this is still down about 10 per cent from October 2010, prices for wings have risen by 23 cents per pound over the last two months.

Turkey Production Steady

US turkey meat production in third-quarter 2011 was 1.4 billion pounds, up less than one per cent from a year earlier. As with broiler production, third-quarter 2011 turkey production saw a reduction in the number of birds being slaughtered and an increase in their average weight. In the case of turkeys, the number of birds slaughtered in the third quarter was 61.9 million, down one per cent from the previous year. Offsetting this was a two per cent increase in average live weights to 28.9 pounds.

Turkey meat production in fourth-quarter 2011 is forecast at 1.5 billion pounds, which would again be a small increase from a year earlier. Growth in turkey production in the second half of 2011 is expected to be quite different from the first half, which showed strong increases in turkey meat production.

Turkey production in 2012 is forecast at 5.85 billion pounds, which would be an increase of just under one per cent from 2011. Even though turkey prices have remained strong through all of 2011, turkey producers will be faced with the impact of high grain prices and a relatively sluggish domestic economy.

Although production was up only slightly in third-quarter 2011, cold-storage holdings of turkey totalled 515 million pounds at the end of September, up 8.8 per cent from a year earlier. The growth in overall stocks hides a wide gap in the direction of stocks levels for whole birds as opposed to those for turkey products. Stocks of turkey products totalled 234 million pounds at the end of the third quarter, an increase of 25 per cent from the previous year. This stock increase has come even as exports of turkey products have been strong, up 23 per cent year-over-year through September. Stocks of whole birds have been moving in the opposite direction. At the end of September, stocks of whole birds were estimated at 281 million pounds, down two per cent from the same period in 2010. With lower stock levels, wholesale prices of whole birds have remained above their year-earlier levels.

Overall turkey cold storage holdings at the end of 2011 are forecast at 215 million pounds, about 12 per cent higher than the previous year. As with third-quarter 2011, almost all the increase will be from higher holdings of turkey products, with little or no increase in stocks of whole birds expected.

With lower stocks of whole birds, there has been considerable upward pressure on whole turkey prices. Prices for whole frozen hen turkeys at the wholesale level averaged $1.06 cents per pound in third-quarter 2011, up 6.5 cents per pound from the second quarter and 8.6 per cent higher than the previous year. Whole turkey prices are expected to average $1.08-$1.12 per pound in fourth-quarter 2011, around 6 per cent higher than a year earlier.

Egg Production Higher

Table egg production in third-quarter 2011 was just over 1.65 billion dozen, up slightly from a year earlier. On a year-over-year basis, table egg production has now risen in the last 11 consecutive quarters. With the number of table egg layers in production increasing from the previous month, table egg production is expected to continue above the previous year’s level in fourth-quarter 2011. However, overall table egg production in 2012 is expected to be only about even with the previous year, as weaker egg prices, high grain costs, and a slowly growing economy dampen expansion.

Hatching egg production in third-quarter 2011 was 264 million dozen, down seven million dozen from third-quarter 2010, a decrease of 2.6 per cent. Hatching egg production is expected to be sharply lower in fourth-quarter 2011 as broiler producers cut back on production. The decrease in third-quarter 2011 was chiefly due to a lower number of meat-type hens as the demand for broiler chicks declined. Hatching egg production is expected to level off in the latter part of 2012 as broiler production starts to gradually expand.

Wholesale table egg prices in third-quarter 2011 averaged $1.18 per dozen, up 26 per cent (25 cents per dozen) from the previous year. Seasonally higher demand in fourth-quarter 2011 is expected to boost prices somewhat, to $1.26 to $1.30 per dozen. This increase would leave table-egg prices slightly higher than the $1.23 averaged in fourth-quarter 2010. Prices in 2012 are forecast to be slightly lower, as exports are expected to decline slightly, placing more eggs on the domestic market.

Egg Exports Higher in September

Although egg prices have been relatively volatile in 2011, egg and egg product exports have remained strong to a number of countries. In September, total egg exports were the equivalent of 26.1 million dozen eggs. This is nine per cent more than a year earlier and over the first nine months of 2011, egg exports are nine per cent higher than during the same period in 2010. In September, exports of shell eggs fell slightly but those declines were more than offset by strong increases in exports of egg products. The increase in exports is related to strong demand in a number of Asian countries and the weakness of the dollar against a number of other currencies.

Total egg exports in third-quarter 2011 totalled 70.6 million dozen on a shell egg equivalent basis, up five per cent from the same period in 2010. With year-to-date exports down to Canada and a number of EU countries, the increases have come from higher shipments to Mexico and a number of Asian countries, particularly Japan and Hong Kong.

Poultry Trade

Record-breaking third-quarter shipments ignited by strong September finish

September broiler shipments helped set a new record for broilers shipped in a given quarter; broilers shipped from July 2011 to September 2011 totalled almost two billion pounds, which eclipses the previous record set in the fourth quarter of 2010. The increase in broiler meat exports is largely fuelled by demand from new markets. US leg-quarters are competitively priced, which is a major factor for both new and historical markets.

Broiler shipments for September 2011 totalled 637 million pounds, 3.1 per cent more than a year ago. Compared with September 2010, several countries imported more broiler meat from the United States. While leg-quarter prices are slightly higher than last year during this time, exchange rates have kept prices competitive against other major broiler exporters, particularly Brazil. Shipments to major broiler importing countries such as Mexico, Cuba, Hong Kong, Angola, Japan, United Arab and China rose from a year ago. Mexico, the top US broiler destination for 2011, imported almost four million pounds more this September, while Hong Kong imported almost 30 million pounds more than it did a year ago. With the exception of September, shipments to Russia in the third quarter of the year have picked up and have been important to the US broiler market.

Third-quarter and September turkey shipments are up from a year ago

Turkey shipments in the third quarter of this year rose from a year ago. A total of 173 million pounds of turkey meat was shipped from July to the end of September. There was an increase of almost nine per cent from the 2010 third quarter. Approximately half of this turkey meat was shipped to Mexico. Excluding Mexico, when compared with last year’s third quarter, more turkey shipments have been going to Hong Kong and Canada, while fewer have been going to the Dominican Republic and China. Turkey shipments totalled 58.8 million pounds in September 2011, an 18 per cent increase from last year. Mexico and Hong Kong accounted for most of the increase from a year ago. Shipments to Mexico increased 16 per cent, while Hong Kong was up 56 per cent. Given continued strength in turkey shipments, the fourth-quarter projections were raised up five million pounds from last month.

Further Reading

-

You can view the full report by clicking here.

November 2011