Large Broiler Supplies Continue To Pressure Prices

Due to expected increases in the number of broilers slaughtered and the continued strong gains in the average liveweight at slaughter, the production estimate for fourth-quarter 2005 was increased by 100 million pounds to 8.85 billion pounds. Higher domestic production and weaker exports have led to increasing stocks and falling domestic prices for most broiler products. The estimate for fourth-quarter ending stocks was increased to 850 million pounds. Estimates for fourth-quarter exports were reduced by 125 million pounds to 1.35 billion pounds.

Higher Broiler Production Expected in 2006

Due to larger numbers of chicks being placed for growout and increases in average broiler liveweight at slaughter, the production estimate for fourth-quarter 2005 was increased by 100 million pounds to 8.85 billion pounds. As a result, the annual estimate for 2005 was raised to 35.3 billion pounds, a 3.6-percent increase from the previous year. Earlier in fourth-quarter 2005, when the broilers to be slaughtered in December were being placed, the number of chicks being placed for growout was averaging close to 2 percent higher than a year earlier. In addition to a greater number being available for slaughter, the average broiler liveweight at slaughter has been over 3-percent higher than the previous year in the last 2 months and is expected to again be at least 2 percent higher in December.

Broiler meat production in November was estimated at 2.933 billion pounds, up 4.9 percent from the previous year. Over the first 11 months of 2005 broiler meat production has totaled 32.4 billion pounds, 3.8 percent more than during the same period in 2004. The increase in meat production in November was due to both an increase in the number of birds slaughtered (718 million), up 1.3 percent from the previous year, and an increase in the average liveweight at slaughter (5.49 pounds), up 3.2 percent.

Higher domestic production and falling demand in some export markets have caused stocks to increase and domestic prices for most broiler products to decrease. Overall, broiler products in cold storage at the end of November were estimated at 869 million pounds, up 13.5 percent from the previous year. While stocks have increased for several broiler products, much of the increase is due to higher stocks of legs (up 120 percent), leg quarters (up 39 percent), and wings (up 27 percent). These increases in cold storage holdings resulted in fourth-quarter ending stock estimates increasing to 850 million pounds. Quarterly ending stock estimates for 2006 were also significantly increased.

The 12-City composite price for whole broilers averaged 66.7 cents per pound in fourth-quarter 2005. This is down less than 2 cents from the previous year, but it is a decline of over a nickel (7.5 percent lower) from the previous quarter. Prices have also declined for a number of other broiler products. The December price in the Northeast market for boneless/skinless chicken breasts was $1.01 per pound, down 21 percent from the previous year. Other broiler products that had similar large price declines were leg quarters, down 11 percent, and wings, down 25 percent. Prices for most broiler products are expected to remain depressed for the near future as a combination of strong production, weakness in demand, and high stock levels are expected to place downward pressure on those prices.

Turkey Prices Higher, Stocks Down

In December the price for whole hen turkeys in the eastern region averaged 83 cents a pound, about 7 cents higher than the previous year and about 15 cents higher than in December 2003. Prices for fourth-quarter 2005 averaged 84 cents per pound, up 8 percent from a year earlier. Prices for turkey parts have also been higher during the fourth quarter as supplies have tightened. Wholesales prices for whole turkeys and turkey parts are expected to remain above year-earlier levels through most of 2006 as stocks (whole birds and parts) are well below the previous year and the 2006 production forecast calls for only small growth in turkey production.

Turkey production in November was 483 million pounds, down marginally from the previous year. The decline in production was due to a 2-percent drop in the number of birds slaughtered. This was partially offset by higher weights as the overall average live weight at slaughter of 26.8 pounds was up 1.8 percent from November 2004. Over the first 11 months of 2005, turkey production has totaled approximately 5 billion pounds, less than 1-percent above the same period in 2004. Strong prices for most turkey products during the second half of 2005 has led to some gains in the number of poults being placed for growout, and the estimates for fourth-quarter 2005 production have been increased slightly, to 1.425 billion pounds. The estimates for the first and second quarters of 2006 were increased by 10 million pounds each so that the total for 2006 is now 5.58 billion pounds, just over 1 percent higher than in 2005.

With only marginal increases in production in 2005 and strong demand in both domestic and export markets, stocks of whole turkeys and other turkey products have fallen. At the end of November, stocks of whole turkeys totaled 59 million pounds, down almost 50 percent from the same time in 2004. Stocks of turkey products were also lower, falling to 142 million pounds, a decline of 20 percent from November 2004. The forecast for ending stocks for 2005 were reduced to 200 million pounds, the lowest for at least the last 6 years. The estimates for quarterly ending stocks in 2006 were also reduced.

November Broiler Exports Are Down From a Year Ago

November 2005 broiler exports were 440 million pounds, a decline of 5 percent from a year ago. A number of countries in Central and Eastern Europe and Asia have reduced their purchases of broiler meat. The two likely chief reasons for the fall were high leg-quarter prices and concerns about Avian Influenza (AI). Lower exports have increased broiler stock levels and pulled broiler prices down. During the early weeks of October, broiler leg-quarter prices in the Northeast market were as high as $0.45 per pound, but by late December, prices had fallen to $0.22 per pound.

The second reason is consumer concerns and reactions to AI, particularly the H5N1 strain in key U.S. export markets. As reports of H5N1 cases expand geographically to parts of Turkey, it is possible that consumers in neighboring countries and nearby regions will exercise a higher level of caution about eating poultry. Because of expected lower broiler meat demand by some importing countries, projections for the first and second quarters of 2006 have been altered to reflect a reduction in U.S. broiler exports.

While Turkey is among the top 10 destinations of U.S. broiler exports, Turkey’s neighbor Russia is the largest market for U.S. exports. Although Russia’s new tariff-rate quota increased the U.S. allotment from 781.2 metric tons in 2005 to 841.3 metric tons in 2006, it is unknown whether Russia’s demand for U.S. poultry meat will match the increase or not.

U.S. Turkey Exports Remain Strong

November turkey exports were 50 million pounds, an increase of 6 percent from the previous year. The primary reason for strong U.S. turkey exports continues to be Mexico’s growing economy and its increasing demand for turkey meat. From January to November, Mexico accounted for about 62 percent of U.S. turkey exports. Fourth-quarter 2005 turkey exports are estimated at 160 million pounds, up 19 percent from the previous year.

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