Corn Demand, Dry Conditions, and Balky Trade Adversely Affecting Cattle/Beef Sector

Poultry: Relatively low stock levels, little or no growth in production, and continued smaller chick placements are expected to place upward pressure on most broiler prices. Cold storage holdings for the end of the third quarter were revised downward by 14 million pounds to 699 million, 7 percent lower than the previous year. Broiler meat production was 4.3 percent higher in October even though October had one additional slaughter day. Turkey supplies remained tight, with wholesale prices for whole birds near $1 dollar per pound in November.

Poultry Trade: Broiler exports were down in October, while demand for U.S. turkey continued to grow. Broiler shipments totaled 444 million pounds, a decline of 9 percent, while October turkey exports totaled 54 million pounds, an increase of 8 percent from a year ago.

Eggs: Wholesale egg prices (NY grade A large) averaged 99.95 cents per dozen in November 2006, nearly 78 percent above the year’s lowest monthly average of 56.4 cents per dozen recorded in May 2006. The rapid rise in egg prices is likely due to continued firm demand and very modest production growth.

Broiler Meat Production Up 4 Percent in October

Broiler meat production totaled 3.18 billion pounds in October, up only 4.3 percent from the previous year even with an additional slaughter day in 2006. Over the first 10 months of 2006, broiler production has averaged 2.1 percent higher than the previous year and has totaled 30.1 billion pounds. The increased meat production in October was the result of both an increase in the number of birds slaughtered, up 3.8 percent, and an increase in the average live weight of birds at slaughter, up 1.5 percent to 5.58 pounds. So far in 2006, the average weight at slaughter for broilers has been 5.46 pounds, which is 2.1 percent higher than in the same period in 2005.

Although the daily slaughter reports show continued growth in average bird weights, the drop in the number of chicks placed for growout, points toward little or no rise in the amount of broiler meat that will be produced in fourth-quarter 2006 and into first-quarter 2007. Over the 5 week period (Nov. 4 to Dec. 2, 2006), the number of chicks placed for growout has remained lower, averaging 2.6 percent below the same period in 2005.

The combination of low broiler product prices in second-half 2006 and sharply rising feed costs is expected to result in a slight decline in broiler production during first-half 2007, to about 18.0 billion pounds.

Cold storage holdings of total broiler products at the end of third-quarter 2006 were revised downward to 699 million pounds, a decrease of 10 percent from the end of the second quarter and 7 percent lower than at the end of the third quarter 2005. Stocks of many broiler products have been declining over the last several months, with stocks of whole birds and leg quarters falling rapidly. Stocks of leg quarters reached 172 million pounds at the end of January, but by the end of October they had fallen to 67 million pounds, almost 50 percent lower than the previous year. With little or no growth in broiler meat production estimated for fourth-quarter 2006, the estimate for ending stocks for 2006 has been reduced 50 million pounds to 700 million.

In fourth-quarter 2005, the domestic broiler industry was facing larger production, weak domestic and foreign demand, and increasing stocks. These factors combined to place strong downward pressure on prices. For almost all of 2006, prices for broiler products have been below their year-earlier levels. However, over the next several months the forecast of little or no growth in production, and lower stock levels, is expected to push prices above their year-earlier levels. Starting in December, the prices for a number of broiler products are expected to move above their year-earlier levels. In November, prices for whole birds averaged 65.9 cents per pound, only 1.5 percent below a year earlier. Prices in the Northeast market for boneless/skinless breast meat and leg quarters were 95.3 and 29.1 cents per pound, down 7.6 and 0.8 percent, respectively.

In the weekly USDA Broiler Market News Report, there is a breakout of the weekly broiler slaughter reported in four size classes. Over the 12 week period ending November 25, broilers with a live weight of over 7.75 pounds (the heaviest class) have averaged 43 percent higher in terms of the number of birds slaughtered weekly compared with the previous year. This strong growth in large broiler slaughter has raised the average live weight for broilers at slaughter. Since most large broilers are cut up for parts, this placed more parts meat per bird on the market, placing downward pressure on prices. However, over the last 4 weeks, this growth has slowed significantly, as processors attempt to slow production increases.

October Turkey Meat Production Up 12 Percent

Turkey meat production in October was reported at 540 million pounds, up 12 percent from October 2005. The increase is the result of a 10.3-percent increase in the number of birds being slaughtered along with an increase in the average live weight of turkeys at slaughter of about 1.8 percent, to 27.4 pounds. Even with the large increase in October, turkey meat production over the first 10 months of 2006 was up only 3.7 percent compared with the same period in 2005.

Despite the growth in turkey meat production, the combination of a strong export market and higher domestic demand has lowered turkey cold storage holdings (especially for whole birds), and prices for most turkey products have increased. Cold storage stocks of turkey products at the end of the third quarter were revised downward to 464 million pounds, 2.9 percent lower than the previous year. Cold storage holdings declined further in October to 412 million pounds. A large portion of this decline in cold storage holdings can be attributed to whole toms (down 14.5 percent).

Prices for turkeys and most turkey products were moving in the opposite direction from broiler products. Prices for whole hens in the Eastern market averaged 99.5 cents per pound in November, up 16 percent from the previous year. On a nominal basis, this is the highest monthly price reported since the mid-1960’s, but on an inflation-adjusted basis the average for December 1984 of 97.3 cents per pound is likely the highest. Throughout 2006, prices for whole birds have been at or above the previous year, and this is the third consecutive year that whole-bird prices will have increased. Prices for a number of turkey parts have also been strong, with breast meat averaging $1.27 per pound in October, up 7 percent from a year earlier. Prices in October were also higher for V-cut wings, up 25 percent.

Over the first 10 months of 2006, the number of turkey poults being placed for growout has averaged 24.6 million per month, up 7 percent from the same period in 2005. This indicates that per capita turkey meat supplies are expected to remain unchanged from a year ago through the end of 2006 and through at least firstquarter 2007.

Broiler Exports Continue To Fall in October

October broiler exports--the first month of the fourth-quarter--totaled 444 million pounds, down 9 percent from a year ago. The decline is largely attributable to the exceptionally strong October 2005 broiler exports that occurred when shipments resumed after trade disruptions related to Hurricane Katrina.

The fourth-quarter 2006 broiler export forecast was lowered by 60 million pounds, however, as lower-than-expected shipments in the third quarter implied potentially weaker exports through the remainder of the year and into 2007. Even with this reduction, fourth-quarter exports are expected to be almost 4 percent above the same period last year.

Broiler export projections for 2007 were lowered 125 million pounds to 5.4 billion pounds. But shipments for next year are still expected to be more than 3 percent ahead of the 2006 forecast.

Turkey Exports Remain Strong in October

Third-quarter 2006 turkey meat exports were 152 million pounds, an increase of 2.6 percent above the same period last year. The increase in third-quarter exports was largely due to strong growth in shipments to Russia and China. These increases more than offset continued lower shipments to Mexico. Turkey exports in October totaled 54 million pounds, up 8 percent from a year ago. Fourth-quarter exports are expected to be 150 million pounds, an increase of slightly more than 1 percent over fourth-quarter 2005.

Higher Egg Prices in Third-Quarter 2006

Wholesale egg prices (NY grade A large) averaged 99.95 cents per dozen in November 2006, nearly 78 percent above the year’s lowest monthly average of 56.4 cents per dozen in May 2006. The rapid rise in egg prices is likely due to continued firm demand and very modest production growth. Production in the fourth quarter is forecast to increase 0.3 percent over the same period last year, as producers respond to higher feed prices. Farm prices of U.S. corn averaged $2.00 per bushel in the 2005/06 marketing year, compared with a projected $2.90-$3.30 per bushel in 2006/07. Slower production growth, coupled with seasonally strong demand, quickly increased wholesale egg prices. Because eggs have few substitutes, when egg prices increase, most users have little alternative but to pay the higher price.

For 2006, wholesale table egg prices (NY grade A large) are forecast at about 71 cents per dozen, compared with 65.5 cents per dozen in 2005. In 2007, prices are expected to range between 78 and 84 cents per dozen.

Third-quarter 2006 table egg production rose to 1,624 million dozen, over 28 million dozen over the same period a year ago. For all of 2006, table egg production is forecast to grow about 1.4 percent over last year. Next year, a slightly lower increase is expected, about 1.3 percent. Hatching-egg production for all of 2006 is expected to decline 2.4 percent, reflecting slower growth in broiler production. For 2007, a small decline in hatching-egg production is anticipated, as both egg and broiler production are expected to increase.

Fourth-quarter retail egg prices are expected to average about $1.40 per dozen, compared with $1.30 a year ago. For all of 2006, retail egg prices are expected to average between $1.29 and $1.33 per dozen. In 2007, prices are expected to rise about 8 percent, due to continued slow production growth. Federally inspected eggs for breaking are forecast to increase just below 1 percent in 2006, and about 3 percent next year.

In the third quarter 2006, U.S. exports of eggs and egg products (in shell-egg equivalent) rose 5.9 percent, compared with a year ago. Most of the export growth was in table and hatching eggs, which rose 3.2 million dozen, and over 1 million dozen, respectively, in the third quarter over the second quarter. Hong Kong became the largest U.S. export market for table eggs (6 million dozen), followed by Canada (4.5 million dozen) and Mexico (2.9 million dozen). U.S. exports of hatching eggs were mostly shipped to Canada, Italy, Israel, and Pakistan. Finally, U.S. egg product exports were down nearly 1 million dozen in third-quarter 2006 from the previous quarter, due to decreased shipments to Japan and the United Kingdom.

For all of 2006, U.S. total egg exports (in shell-egg equivalent) are forecast to decrease about 5.8 percent from last year’s export boom. In 2007, exports are forecast to rise by nearly 2 percent over 2006.

Further Information

For more information view the full Livestock, Dairy and Poultry Outlook - December 2006 (pdf)

December 2006