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

Total Red Meat and Poultry Production and Consumption In 2007 To Rise More Slowly Than in 2006

Total U.S. red meat and poultry production in 2007 is projected to grow at a considerably slower rate than expected for 2006. Increases of about 2 percent are expected for red meat and poultry production next year. Egg production will likely increase by slightly more than 1 percent, while 2007 milk production is expected to grow by slightly less than 1 percent.

Total per capita consumption of red meats and poultry on a retail basis in 2007 is expected to be 225.6 pounds, an increase of less than 1 percent from the 225.2-pound forecast for 2006. Per capita egg consumption expected next year is 260.3 eggs, less than 1 percent above forecast per capita consumption this year of 258.6.

Poultry

Poultry production is expected to continue to increase in 2007, although the rate of growth is expected to be less than in recent years. Broiler production is expected to total 36.8 billion pounds with turkey production estimated at 5.7 billion pounds. Expected higher corn prices and large supplies of total meat products are expected to dampen any incentive to strongly expand production. However, general economic indicators such as real GDP and per capita disposable income are forecast to continue to increase.

Poultry Trade

U.S. broiler and turkey exports in 2007 are expected to be about 5.4 billion pounds and 620 million pounds, respectively. First-quarter 2006 broiler exports totaled 1.338 billion pounds, considerably higher than previously estimated. It is likely that low prices for leg quarters spurred large purchases that more than offset lower shipments to areas with AI concerns. Broiler exports this year are expected to total 5.5 billion pounds. Russia has reportedly resumed re-licensing for poultry meat and poultry products on May 5, 2006, under a new system, after canceling all poultry import permits on April 27. Turkey exports in the first quarter 2006 were 119 million pounds more than 5 percent lower than the first quarter 2005. The United States is expected to export 575 million pounds of turkey this year, down slightly from 2005.

Eggs

The U.S. egg-type layer flock averaged a record, pushing egg production up and prices down in the first quarter 2006. However, as supplies come closer to demand, prices are expected to rebound, ending 2006 higher than 2005. In 2007, egg production is forecast to increase 1.4 percent, and prices are expected to go up 6 to 8 percent due to higher feed costs.

U.S. Broiler Production To Increase

U.S. broiler production is expected to total 36.8 billion pounds in 2007, up 1.9 percent from forecast production for 2006. Broiler production increases are expected to be held down by high levels of total meat production and higher feed prices. The broiler industry has had annual gains in overall production since the mid-1970s.

Increases in production are expected to be relatively even throughout the year. With the smaller gains in production and expected growth in exports, domestic per capita consumption levels are expected to increase only marginally in 2007. Cold storage holdings of broiler products are expected to gradually decline with stock levels becoming tighter towards the end of 2007. Most of the gains in production are expected to come from higher average live weights as increases in the number of birds slaughtered are only expected to rise slightly.

Per capita domestic broiler consumption (retail weight basis) is expected to only increase marginally in 2007 after increasing over 2 pounds to nearly 88 pounds in 2006. Over the 10 year period (1998 to 2007) per capita broiler consumption is forecast to rise from 72 to over 88 pounds, an increase of 16 pounds or around 7.9 billion pounds overall. By comparison during the same period, per capita retail weight consumption of pork and beef are forecast to be basically unchanged.

The 12-city price for whole broilers is expected to average between 64 and 69 cents per pound in 2007. This is an increase of almost 7 percent from 2006, when broiler product prices are expected to be depressed through most of the year due to large supplies of meat products and high stock levels caused by strong production growth at the end of 2005 and the beginning of 2006. The increase is expected to come from higher prices throughout the year as supplies of broiler products are expected to be tighter. Production increases for beef and pork in 2007 are expected to act to hold down any large price increases for broiler parts.

Turkey Production To Increase Less Than 2 Percent Next Year

After growing to an expected 5.6 billion pounds in 2006, turkey production is forecast to reach 5.7 billion pounds in 2007, up about 1.7 percent. The growth is expected to come from a slightly higher number of birds slaughtered and higher weights. Even with 2 years of positive growth, per capita consumption of turkey on a retail weight basis is forecast at 16.6 pounds in 2007, about the same as expected in 2006 and down slightly from earlier in this decade. One reason for the decline is the expected growth in turkey exports, especially those to Mexico.

Prices for whole hen turkeys are expected to average between 68 and 74 cents per pound in 2007 down almost 4 cents per pound on average from the 2006 forecast. The decrease is expected to result from increases in cold storage holdings as they begin to put downward pressure on whole bird prices.

Broiler Production Higher in First-Quarter 2006

Broiler production in first-quarter 2006 totaled 8.94 billion pounds, up 4.1 percent from first-quarter 2005. The growth in production came from a mixture of an 1.8- percent increase in the number of birds going to slaughter and a 2.4-percent increase in the average liveweight of slaughtered birds.

Broiler production for second-quarter 2006 is forecast at 9.1 billion pounds, an increase of just under 2 percent from the previous year. During April, the daily broiler slaughter reported by the Agricultural Marketing Service (AMS) showed a 3.5-percent decline in the total liveweight of birds being slaughtered compared with April 2005. However, most of that decline is due to one additional slaughter day in April 2005. Another indicator pointing to slowing growth in broiler production is the weekly change in the number of chicks placed for growout. Over the last 5 weeks (April 8 through May 6) the number of chicks being placed for growout has averaged 1.5 percent lower than in the same period the previous year.

After reaching a high of 924 million pounds at the end of 2005, cold storage stocks declined to 865 million pounds by the end of first-quarter 2006, still 29 percent higher than the same period last year. This shows a large movement in broiler products, considering the strong (4.1 percent) increase in broiler production in firstquarter 2006. Most of the increases in cold storage holdings were of dark meat parts, particularly leg quarters which were up 143 percent from the end of firstquarter 2005.

Turkey Production Up Slightly

Turkey production totaled 1.35 billion pounds in first-quarter 2006, up 2 percent from first-quarter 2005. Most of the production growth came from a higher number of birds being slaughtered (up 1.4 percent). The average weight of turkeys being slaughtered in first-quarter 2006 rose to 29.5 pounds, up slightly less than 1 percent from first-quarter 2005. Turkey production in the second quarter is expected to reach 1.43 billion pounds. This would be a 2-percent increase from the same period last year.

Cold storage stock levels for turkey continue to be relatively tight, with total holdings at the end of first-quarter 2006 reported at 375 million pounds, down 10 percent from the same period in 2005. However the difference between cold storage holdings of whole turkeys and turkey parts is quite large. Stocks of whole turkeys were estimated at 163 million pounds, 22 percent lower than the previous year. Stocks of turkey parts were estimated at 211 million pounds, a 4-percent increase over a year earlier. The increase in cold storage holdings of turkey parts may be the result of a slowing in exports to Mexico in first-quarter 2006, down 4 percent from first-quarter 2005.

Broiler Exports Grow in First-Quarter 2006

U.S. broiler exports for January through March 2006 were up almost 12 percent from first quarter 2005. The expansion in exports is due primarily to very low U.S. leg-quarter prices. During the fourth quarter of 2005 and first quarter of 2006, a chain reaction of events related to foreign consumers’ response to A.I. slowed demand for U.S. broiler meat. Stocks accumulated in the United States and abroad as a result, causing broiler meat prices--leg quarters particularly--to fall.

The resulting low prices have increased demand in price-sensitive markets and also those markets that have not had any A.I. outbreaks. Three areas with large increases in purchases from the United States are Canada, Mexico, and China/Hong Kong. In both Canada and Mexico there have been no AI outbreaks and buyers have taken advantage of the low prices. First-quarter 2006 shipments to Canada were up 31 percent from the previous year with exports to Mexico 27 percent higher. Shipments to China/Hong Kong in the first quarter totaled 157 million pounds, 55 percent higher than in the previous year. While shipments to Hong Kong were down, they were more than offset by larger shipments directly to China. Over time a greater percentage of broiler shipments have been going directly to China rather than through Hong Kong.

On April 27, 2006, the Russian Government cancelled permits for poultry meat and poultry products, due “…to out of control fraud, smuggling and falsification of veterinary certificates.” (“Russia Orders Reissue of Poultry Import Permits” USDAForeign Agriculture Service: http://www.fas.usda.gov/gainfiles/200604/146187597.pdf). The effective date of the ban was May 8th, meaning shipments on the water by May 8th were allowed into Russia under old permits. On May 5, 2006, the permitting process resumed under a new system of veterinary and phytosanitary surveillance. Russia is by far the largest importer of U.S. broiler meat. Last year Russia imported 1.6 billion pounds of U.S. broiler meat, accounting for 32 percent of all U.S. broiler exports. This year U.S. broiler exports are expected to total 5.5 billion pounds.

First-Quarter 2006 Turkey Exports Fall Slightly From a Year Ago

Turkey exports in the first quarter of 2006 were 119 million pounds, down more than 5 percent from the first quarter of 2005. The most likely reason for the reduction is Mexico’s large purchase of broiler meat. In total, Mexico’s purchases of U.S. poultry meat have increased as higher broiler shipments offset the 4-percent decline in turkey shipments to Mexico in first-quarter 2006. Because U.S. broiler meat prices are expected to remain favorable relative to turkey for most of the year, the 2006 forecast for turkey exports was reduced slightly. U.S. turkey exports this year are expected to be about 1 percent higher than in 2005.

Broiler Exports at 5.4 Billion Pounds in 2007

U.S. broiler exports are forecast at 5.4 billion pounds in 2007. Next year, expectations of increased supplies of U.S. broiler meat, and strong macroeconomic growth in important foreign markets, will likely keep broiler exports steady although leg-quarter prices are expected to be stronger. Most U.S. broiler meat shipments in 2007 are expected to go to Russia, Mexico, China/Hong Kong, the CIS countries, and the Caribbean. Broiler exports to Russia are expected to only increase slightly in 2007, growth in shipments is limited due to an import quota.

Strength in Turkey Exports Expected To Continue Through 2007

Turkey meat exports are projected at 620 million pounds in 2007. Expectations of continued economic growth, both this year and in 2007, are the most important factor-likely to drive Mexican demand for U.S. turkey products. The Mexican economy is forecast to grow at a rate of almost 4 percent both this year and in 2007, pointing to continued growth in turkey demand. In the first quarter of this year, Mexico accounted for 66 percent of U.S. turkey exports, and will likely continue to dominate exports through 2007 as well.

U.S. Egg-Type Flocks Rose to Record High in the First Quarter

The U.S. egg-type layer flock averaged a record of 291.1 million birds during the first quarter 2006, continuing an increase that began in mid-2005. The laying flock is expected to continue to increase for the remainder of the year, but will likely slacken in 2007. In the first quarter of 2006, table egg production rose to 1,612 million dozen, nearly 24 million dozen over a year ago. For all of 2006, table egg production is forecast to grow 2 percent over last year. In 2007, however, production is expected to grow at a slower pace of 1.3 percent.

The result of those added eggs helped bring wholesale table egg prices (NY grade A large) down from 75.0 cents per dozen in fourth-quarter 2005 to 71.4 cents a dozen in the first quarter of 2006. For 2006, wholesale table egg prices (NY grade A large) are forecast between 68 and 72 cents per dozen, compared with 65.5 cents per dozen in 2005. In 2007, prices are expected to go up between 72 and 76 cents a dozen, as egg production growth slows.

Retail egg prices averaged $1.36 per dozen in the first quarter of 2006, compared with $1.30 a quarter ago, and $1.21 a year ago. For all of 2006, retail egg prices are expected to average between $1.25 and $1.29 per dozen. In 2007, prices are expected to increase about 7 percent, reflecting in part higher wholesale prices. Shell egg prices will slow the growth of federally inspected eggs that go to the breaking market to 2 percent in 2006 compared with a 6.3-percent rise in 2005. In 2007, as egg prices are forecast to rise, growth in eggs broken will likely grow about 3 percent.

In the first quarter 2006, U.S. exports of eggs and egg products (in-shell egg equivalents) declined by 17 percent compared with a year ago. Major markets where U.S. shipments declined include Japan, Canada, Brazil, the United Kingdom, the Netherlands, and Spain. On the other hand, U.S. shipments to Germany, Hong Kong, and Taiwan increased in first-quarter 2006 above a year earlier. For all of 2006, U.S. exports are forecast to decrease about 17 percent. In Asia, both the United States and Brazil are facing tough competition from the Netherlands, especially in the shell egg market. U.S. egg exports in 2007 are forecast nearly 4 percent higher than in 2006.

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