Broiler meat production is expected to expand through the end of third-quarter 2008, but to be flat on a year-over-year basis in the fourth quarter as a lower number of birds being slaughtered is expected to offset higher average weights. The slowing of broiler production is expected to provide some upward strength to broiler prices, especially breast meat products. Even with higher stocks, whole turkey prices are expected to remain higher than the previous year through the third quarter. Fourthquarter 2008 whole-turkey prices are expected to continue higher than a year earlier. With the number of hens in the table egg flock still below a year earlier, egg prices are expected to average between $1.15 to $1.18 per dozen at the wholesale level in the third quarter, but prices in fourth-quarter 2008 are expected to be lower than the very strong prices seen in fourth-quarter 2007.

Third-Quarter Broiler Meat Production Estimate Increased

The US broiler meat production estimate for third quarter 2008 was increased by 50 million pounds to 9.3 billion pounds, up 1.9 per cent from third-quarter 2007. The estimate for fourth-quarter 2008 remained unchanged at 9.2 billion pounds, down less than 1 per cent from a year earlier. While the number of broilers slaughtered was higher in July, most of the increase in production for the remainder of the third quarter is expected to come from higher average bird weights. The estimates for the third and fourth quarters of 2009 were also increased slightly due to a somewhat better outlook for feed prices in 2009. The revised production total for 2009 is now 36.7 billion pounds, still slightly lower than in 2008.

Two strong trends are currently in place in broiler meat production. Firstly, over the last several weeks, the number of chicks being placed for grow-out has been sharply lower than the previous year. This will eventually result in a smaller number of birds available for slaughter. This decline is expected to begin to show up in weekly slaughter numbers by the middle of September, and the recent number of broiler-type eggs being placed in incubators point toward a continuation of this pattern.

Second, so far in third-quarter 2008, almost all of the growth in the number of broilers slaughtered has been due to growth in the numbers of very heavy broilers slaughtered. In the Agricultural Marketing Service’s USDA Broiler Market News Report, the broilers slaughtered weekly are divided into four weight categories. So far in third-quarter 2008 (July 5 through September 5), the number of broilers slaughtered in the heaviest weight category (over 7.75 pounds live weight) has been 116 per cent higher than during the same period in 2007. The increase in slaughter of these very heavy broilers has been the driving factor in broiler slaughter, as the numbers of birds slaughtered in the three lighter weight categories are down or only fractionally higher compared with the previous year.

Broiler meat production in July was 3.22 billion pounds, up 5.6 per cent from a year earlier. However, much of this gain is due to one more slaughter day in July 2008 than in July 2007. The number of birds slaughtered in July was up 3.7 per cent to 785 million, and the average live weight of these birds was 5.54 pounds, up 1.3 per cent from July 2007.

For the week ending September 6, the National Agricultural Statistics Service estimated that 170 million broiler chicks were placed for grow-out. This is a 3.4-percent decrease from a year earlier, continuing a pattern over the last 7 weeks of significantly fewer chicks being placed for grow-out compared with the previous year. This pattern is expected to continue through the end of the third quarter and into the fourth. Broiler integrators are faced with both a weak economy that may result in reduced consumption and much higher prices for feed components. While large increases in exports have resulted in strong prices for leg meat products, prices for breast meat products have fallen in the last several months.

Stock Levels Higher at the End of July

Stock levels for broiler products continue to be above those of the previous year. Ending stocks for the second quarter were revised upward slightly to 739 million pounds. By the end of July, stocks had fallen to 715 million, down 24 million pounds from June, but still 12 per cent higher than a year earlier. Stocks for some of the various products seem to be running counter to recent wholesale price movements. Stocks of leg quarters were 27 percent higher at the end of July 2008 than in the previous July, yet wholesale leg quarter prices have been strong for several months. The same is true for thigh meat product stocks, which are about 12 per cent higher than the previous year, but prices at the wholesale level have been increasing.

With the increase in very large broilers being slaughtered, there has been an increase in the amount of breast meat produced. This has led to declines in the price of breast meat products over the last several months. In August, wholesale prices for boneless/skinless breast meat in the Northeast market fell to $1.29 per pound. This is down 21 cents per pound from just 3 months earlier and over 30 cents per pound lower than a year earlier. With high prices for leg quarters underpinning prices for leg meat products, the wholesale price for boneless/skinless thigh meat in the Northeast market rose to $1.30 per pound in August. This may be the first time that boneless/skinless thigh meat has been priced above boneless/ skinless breast meat. In May 2008, boneless/skinless breast meat sold at a 23-cents-per-pound premium to boneless/skinless thigh meat, and in July 2007 boneless/ skinless thigh meat was priced at $1.13 per pound, 49 cents below the price of boneless/skinless breast meat.

Exports for 2008 Expected at Record Levels

Broiler exports are estimated at a record 6.67 billion pounds in 2008, up 13 per cent from the previous year. Second-quarter 2008 exports were a record 1.79 billion pounds but shipments may slow somewhat in the fourth quarter due mainly to the high level of leg quarter prices over the last several months. Exports to China were very strong over the first 7 months of 2008 but are expected to slow somewhat with the end of the Olympics. In 2009, exports are expected to drop to 6.28 billion pounds, mostly as a result of trade uncertainties.

Broiler exports in July totaled 646 million pounds, up 34 per cent from the previous year. This large increase in shipments and continued strength in leg quarter prices has led the estimate for third-quarter exports to be increased by 100 million pounds to 1.75 billion. Exports over the first 7 months of 2008 have totaled 3.9 billion pounds, a 22-per cent increase over the same period in 2007. While Russia continues to be the largest export market, shipments so far in 2008 have also been very strong to China, Cuba, South Korea and Vietnam, among others. The average unit value for broiler exports so far in 2008 has also been rising as leg quarter prices have strengthened. Over the first 7 months of 2008, the value of broiler exports was $2.0 billion, 37 per cent higher than in the same period in 2007.

Turkey Production Up 9 Per Cent in July

Turkey meat production in July was 548 million pounds, up 9 per cent from a year earlier. The increase was mostly the result of a higher number of birds slaughtered, as average weights rose less than 1 per cent. In July, the number of turkeys slaughtered was 24.2 million, an increase of 7.1 per cent from the previous year. The average live weight at slaughter was 28.4 pounds, up 0.7 per cent from a year earlier.

Over the first 7 months of 2008, US turkey meat production totaled 3.65 billion pounds, up 7.5 per cent from the same period in 2007. The forecasts for the third and fourth quarters of 2008 have been raised slightly to 1.56 and 1.58 billion pounds. The forecast for the third quarter is now up 4.8 per cent from a year earlier, and the expected production in the fourth quarter is even with the previous year. The estimate for 2009 production was increased to 6.1 billion pounds, down 2.2 per cent from 2008, due to weak prices for many turkey products and higher feed and energy costs.

With the strong increase in turkey meat production over the first 7 months of 2008, cold storage holdings have also risen. At the end of July, cold storage holdings of whole turkeys were 288 million pounds, up 7 per cent from the previous year. Holdings of turkey parts have risen even faster, totaling 331 million pounds at the end of July, 41 per cent above a year earlier. This indicates a slowdown in domestic demand, as turkey exports over the first half of 2008 were up over 20 per cent and exports are expected to remain relatively strong in the second half of 2008. Cold storage holdings are expected to remain above year-earlier levels through the remainder of the year.

While cold storage holdings of whole turkeys at the end of July were 7 per cent higher than the previous year, prices for whole birds continue to remain well above year-earlier levels. In August, the wholesale price for whole hen turkeys in the Eastern market was 97 cents per pound, up 8 per cent from August 2007. Prices for whole hens in the third quarter are forecast to average between 96 and 97 cents per pound, up about 7 cents per pound from third-quarter 2007. Prices in the fourth quarter are forecast to average between 94 and 98 cents per pound. While whole bird prices remain above the previous year, prices for many turkey parts have fallen, a reflection of the large increase in stocks of these products. The largest price decreases have been for boneless/skinless breast meat.

Exports Up 26 Per Cent in July

Turkey exports in July continued to be well above year-earlier levels, totaling 59 million pounds, up 26 per cent from a year earlier. Exports in 2008 have been strong to a number of markets, with growth especially strong to China and Hong Kong. Over the first 7 months of 2008, shipments to China and Hong Kong totaled 59 million pounds, up 84 per cent from the same period in 2007. Some of this increase has likely been due to the Olympics, and the growth in shipments to this market is likely to be slow over the remainder of 2008.

Egg Prices Climbing in Third Quarter

In July, table egg production was reported at 541 million dozen, up fractionally from a year earlier. This is the second consecutive month that table egg production has increased. However, table egg production over the first 7 months of 2008 was 3.7 billion-dozen, still down slightly from the same period in 2007. The reduction was due to a smaller number of hens in the table egg flock. In July, the overall number of hens in the laying flock was 278 million, a decrease of 1.1 per cent from July 2007. This continued the long-term pattern of a smaller number of hens in the table egg flock. Table egg flock numbers have been continuously below the previous year (on a year-over-year basis) since January 2007.

Even with strong prices for table eggs during much of the first 7 months of 2008, the number of eggs used for breaking has also been higher. In July, over 183 million-dozen eggs were used in the breaking market (up 10 per cent) and so far in 2008, breaking use has totaled 1.2 billion-dozen, a 4 per cent increase over the same period in 2008.

Over the first 8 months of 2008, the wholesale price for one dozen eggs in the New York market has varied widely - from a high of $1.62 per dozen in March to a low of $1.04 in May. After the Easter holiday, egg prices had a seasonal decline in April and May, then rose in June, only to decline again in July. In August, prices began climbing and averaged around $1.22 per dozen. Prices have continued to strengthen and by the beginning of September, weekly prices were averaging over $1.30 per dozen. In third-quarter 2008, prices are expected to average $1.15-1.18 per dozen. Egg prices are forecast to average $1.22-1.28 per dozen in fourth-quarter 2008, a high price in historical terms, but down from the very strong prices in fourth-quarter 2007.

Strong Domestic Prices Depress Exports

Strong prices for table eggs during much of the first 7 months of 2008 have depressed egg exports, with shipments down 18 per cent through July compared with a year earlier. Exports of eggs have been lower to almost all of the major traditional markets however, much of the decline stems from sharply lower egg and egg product shipments to Mexico and Hong Kong (both markets down over 40 per cent). The only major market that has shown an increase is Canada. Exports to this market were up 23 per cent in the first 7 months of 2008, compared with 2007. With strong domestic prices forecast for the remainder of the third quarter and into the fourth, exports are expected to remain below a year earlier through the rest of 2008.

Further Reading

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September 2008