US Poultry Outlook Report - June 2006 - By U.S.D.A., Economic Research Service - This article is an extract from the June 2006: Livestock, Dairy and Poultry Outlook Report, highlighting Global Poultry Industry data.

Poultry

Broiler production for 2006 and 2007 are unchanged from last month. Production in the second quarter of 2006 is estimated at 9.1 billion pounds, up 1.9 percent from a year earlier. The slow down in broiler meat production has begun to lower cold storage holdings and has put upward pressure on broiler prices. Prices for whole hen turkeys remained strong in May at 71 cents per pound, up 6 percent from a year earlier and over 7 percent higher than in May 2004.

Poultry Trade

U.S. broiler and turkey exports were lower in April, compared with April 2005. U.S. broiler shipments for April 2006 totaled 441 million pounds, down 6 percent from April 2005, largely due to lower shipments to Russia. U.S. turkey exports totaled 35 million pounds, down 29 percent from April 2005 due to lower shipments to Mexico. Next year, U.S. broiler exports are expected to increase almost 2 percent, while U.S. turkey exports are expected to increase almost 4 percent.

Special Section

Lower international demand for poultry has resulted in lower poultry prices in Brazil. Despite higher increased domestic poultry consumption, the industry has imposed strong measures to reduce production.

April Broiler Production Down, Prices Strengthen

Total broiler meat production in April was 2.82 billion pounds, down 1.3 percent from April 2005. The major reason for the decline in production was that April 2006 had one less slaughter day than last year. One less slaughter day resulted in 2.9 percent fewer birds being slaughtered compared with April 2005. The reduction in the number of birds slaughtered was partially offset by a 1.7-percent increase in average live weights.

Broiler meat production is expected to be higher in May, as May 2006 has an additional slaughter day compared with a year ago. However, with a lower number of chicks being placed for growout, the total number of birds for slaughter is expected to be below May 2005 on an adjusted basis. The reduced number of birds being slaughtered is again expected to be partially offset by higher average live weights.

The pattern of a smaller number of broilers going to slaughter is expected to continue into the third quarter with production estimated at 9.1 billion pounds, up only 1.9 percent from the previous year. Average weight gains in the third quarter are expected to increase from last year, more than offsetting the decline. Over the last 5 weeks, (May 6 to June 3) the number of chicks being placed for growout weekly has averaged just over 174 million, down 2.4 percent from the same period in 2005.

Over the last several weeks prices for most broiler products have strengthened, as production growth has slowed and cold storage levels have started to decline from earlier record levels. In May, the 12-City wholesale price for whole broilers averaged 59.6 cents per pound, up slightly from the previous month, after declining in 6 out of the previous 7 months. Prices for broiler parts have strengthened to an even greater extent. In May, prices for boneless/skinless breast meat in the Northeast market averaged $1.12 per pound, an increase of over 15 cents per pound from the previous month and the highest price since October 2005. Even with the increases in May, however, prices for boneless/skinless breast meat were still 19 percent lower than in May 2005.

A continuation of breast meat price increases are likely, as early-June prices had already increased to around $1.25 per pound. Prices for other broiler parts have followed the same path as breast meat, with prices increasing strongly in May, but still lower than the same period in 2005. As with breast meat, prices for most broiler parts have continued to strengthen in early June and are expected to move up through most of the third quarter.

Turkey Production Falls in April, but Are Expected Higher in the Second Quarter

Turkey meat production in April was 435 million pounds, down 2.5 percent from a year earlier. The decline in production was the result of a small (less than 1 percent) decrease in the number of turkeys slaughtered (April 2006 had one less slaughter day than April 2005) and a 1.8-percent decrease in the average liveweight of birds at slaughter.

With the small decrease in the number of birds slaughtered in April, May’s production is expected to be considerably higher than a year earlier, as May 2006 has an additional slaughter day. As in April, the average liveweight of turkeys slaughtered in May is expected to be slightly lower than a year earlier, slightly offsetting the expected increase in birds slaughtered. Turkey meat production in the third quarter of 2006 is estimated at 1.41 billion pounds, up 2.5 percent from the previous year.

With turkey meat production expected to be only about 2 percent higher in the first half of 2006 compared with a year ago, wholesale prices for most turkey products remained strong. May prices of Eastern region whole hen turkeys were 71.3 cents per pound, an increase of about 5 percent from May 2005. Over the first 5 months of 2006, whole turkey prices have been between 1 and almost 6 percent higher than the same period last year.

Prices have not been as strong for turkey parts however. May prices for most turkey parts are about even-to-somewhat lower than a year ago. Much of the downward pressure on turkey prices has come from the very low prices over the last 6 months in the broiler industry. As broiler prices rise, turkey parts prices are also expected to gradually strengthen.

Broiler Exports Are Down in April

Broiler exports in April were 441 million pounds, down 6 percent from April 2005. The decline is largely due to lower shipments to Russia, the largest U.S. market broiler market. Exports to Russia totaled 96 million pounds, down 44 percent from a year ago. Although April shipments to the next four largest markets were larger than April 2005, their combined increase was not large enough to offset Russia’s year-over-year reduction in U.S broiler meat imports.

For 2006, broiler exports are expected to be 5.5 billion pounds, almost 7 percent above 2005. Next year, exports will likely reach 5.6 billion pounds, or about 1.7 percent above 2006. Factors assumed to be driving exports both this year and in 2007 include competitive prices of U.S. broiler meat, relative to other exporting countries, as well as relative to prices of other animal proteins. Also, strong economic growth in such key importing countries as Russia, Hong KongChina, and Mexico is expected to support consumer demand for U.S. broiler meat. High energy prices clearly boosts economic growth in both Mexico and Russia, in particular.

Turkey Exports Are Down in April

Turkey exports totaled 35 million pounds in April, down 29 percent from April 2005. The decline is attributable to what appears to be Mexico’s substitution of attractively priced U.S. broiler meat in place of U.S. turkey. For 2006, turkey exports are expected to be 574 million pounds, an increase of almost 1 percent over last year. U.S. turkey exports for 2007 are expected to be 595 million pounds, more than 3.5 percent above export expectations for this year.

Brazil’s Broiler Industry Makes Short-Term Supply Adjustments in Response to Lower International Poultry Demand

Brazil is the world’s largest broiler meat exporter and the world’s third largest broiler meat producer, after the United States and China. In the past few years, the Brazilian broiler industry benefited from strong export market demand as consumers around the world, reacting to outbreaks of Bovine Spongiform Encepalopathy (BSE) in the United States and Canada in 2003-2004 and Foot and Mouth Disease (FMD) in Europe and South America in 2001-2002, substituted chicken meat in place of red meats.

The outbreaks of avian influenza (AI) in late 2003 in Southeast Asia resulted in accelerated foreign demand for Brazilian poultry products which was met by a quick increase in production and expanded exports of competitively priced chicken meat. Since 2003, Brazil’s broiler exports have increased by nearly 20 percent per year and have added 41 new market destinations. In 2005, Brazil accounted for 56 percent of the major importing markets, compared with a share of 30 percent 5 years earlier (FAS/USDA).

Brazilian broiler meat exports during January-May 2006 totaled 1.05 million tons, representing a 6-percent decline over the same period last year. This decline can be attributed to AI concerns, increased price competitiveness of U.S. broiler exports, and reduced imports by Russia. Brazilian broiler meat exports included 1.0 million tons of fresh/frozen chicken meat products (a 7-percent decrease over a year earlier), and 46,200 tons of processed (cooked) products (representing a 62-percent increase over the same period in 2005), indicating that the reductions in shipments of freshfrozen products have been partially offset by increases in cooked products (table 1) (Secretaria de Comércio Exterior, SECEX data).

At the beginning of 2006, the lower foreign demand for Brazilian chicken meat combined with the appreciation of Brazil’s currency, the real, to reduce the profitability of exports. The real appreciated 17.6 percent for the first quarter of 2006 compared with a year earlier, making Brazilian poultry products more expensive in terms of other countries’ currency. Additionally, the rapid escalation of chicken production in Brazil (a 10-percent annual growth since 1998) resulted in 235,100 tons of additional chicken meat for the first quarter of 2006, compared with the same period in 2005 (Apinco). This situation led the industry to initially market domestic poultry meat otherwise exported.

Brazil’s domestic broiler consumption is significant, as 71 percent of total production is consumed in the domestic market. Domestic consumption of poultry meat in Brazil has experienced rapid growth in recent years, 7 percent annual growth since 1998, and per capita chicken meat consumption in Brazil for 2006 is forecast at 37.9 kilograms, compared with 46.5 kilograms in the United States (FAS/USDA).

Lower retail prices for whole chickens compared with beef and pork led to higher domestic consumption levels, a 13-percent increase in the first quarter of 2006 compared with the same period last year (Apinco). However, the capacity of the domestic poultry market to absorb increased supplies has not been sufficient to prevent domestic prices from falling significantly. Producer poultry prices have declined to their lowest levels since 2001, significantly reducing industry profitability.

Lower broiler prices (fig. 1) have induced the Brazilian broiler industry to implement several short-term production reduction strategies, including holding up new sector investment, reducing the housing of chicks (i.e. not re-populating existing houses, and reducing imports of eggs for hatching and breeding chicks), and temporarily closing chicken houses that receive day-old chicks for grow out. In some regions, poultry producers have discarded fertilized eggs.

Consequently, the monthly housing of slaughter chicks was reduced to 333 million birds in April 2006, representing a 10-percent reduction compared with last year. The industry expects to further reduce the chicks placed by an estimated 9 percent by yearend compared with the levels in 2005 (AviSite June 2006 and Instituto FNP May 2006). The Brazilian Government announced the allocation of a US$150 million credit line for the storage of chicken (and pork meat) to assist the industries to weather the current market conditions (Safras & Mercado, May 2006).

Brazil Remains Largest World Exporter of Broilers

Since 1998 Brazil broiler exports have grown about 24 percent per year. Exports accelerated in 2004 when products from major competitors--Thailand, China, and the United States--were barred from major importing countries due to AI--high pathogenic and low pathogenic--related concerns. Brazil became the world’s largest poultry meat exporter in 2004, both in volume and value.

In 2005, Brazilian poultry exports were comprised of frozen chicken parts (57 percent), whole frozen chickens (35 percent), prepared chicken meat (5 percent), and other poultry meat (3 percent). Brazil is beginning to focus on higher value broiler products such as broiler parts. Major Brazilian markets for fresh/chilled/frozen poultry meat last year included Japan, Middle Eastern countries, the EU-25, and Russia.

Unlike the red meats (beef and pork), Brazil's poultry meat exports are accepted by some premium markets, such as Japan and Korea. The United States and Canada, however, still bar imports of Brazil’s fresh, chilled, and frozen poultry meat because of disease concerns, Exotic Newcastle Disease, in particular. Major markets for Brazilian processed poultry meat so far in 2006 are the EU-25 and the Middle Eastern countries (GTIS data).

Further Information

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

Source: Livestock, Dairy and Poultry Outlook - U.S. Department of Agriculture, Economic Research Service - June 2006