Outlook for Livestock - Turkey Production Steady - US - This article is an extract of a speech made by Shayle D. Shagam at the USDA Agricultural Outlook Forum 2005. For the livestock sector, the year 2004 can possibly be summed up in the opening lines of Charles Dickens's A Tale of Two Cities: "It was the best of times, it was the worst of times... ...it was the spring of hope, it was the winter of despair..."

The United States lost many of its major export markets for beef due to the discovery of a case Bovine Spongiform Encephalopathy (BSE) in December 2003 and faced trade restrictions in poultry due to discoveries of Avian Influenza in early 2004.

Analysts held their collective breath, waiting for large pork production increases as producers expanded in response to good returns. Yet, despite record domestic supplies of meat, average cattle prices in 2004 eclipsed 2003's record, broiler prices reached a new record, and hog prices were the highest since 1997.

The year 2005 opens with great promise. Strong demand for meat protein and moderate growth in meat production have continued to support prices, grain costs have moderated, and the multiyear drought in the western United States has diminished. Producers have responded to increased returns in a measured fashion. Production increases in pork and poultry are expected to be quite moderate in response to the good returns currently enjoyed by these sectors. Positive returns for cow-calf producers and a lessening of drought in the western United States have led to a turnaround in the cattle cycle which had experienced 8 years of liquidation.

There are, however, points of caution in the upcoming year. Although progress has been made in addressing the concerns of our trading partners, major U.S. beef export markets remain closed and supplies of red meat and poultry for domestic consumption are expected to increase 2-3 percent. Domestic demand remains firm but increased supplies of meat are expected to pressure prices down from last year=s highs. As the United States continues to expand export sales, markets will likely find additional support. Continued economic growth and favorable exchange rates may be key factors for the U.S. meat sector in 2005.

Turkey Production Steady

After 2 years of declines, turkey production in 2005 is forecast to increase 2-3 percent to 5.58 billion pounds. Despite increasing returns, turkey production declined 3.7 percent last year as egg sets lagged year earlier levels in every month from mid-2003.

The number of turkeys slaughtered in 2004 declined more than 5 percent, only slightly offset by a small increase in average live weights. Recent egg sets have remained below year earlier, indicating producers are remaining cautious in expansion plans. The rate of decline in sets had been slowing through December but the number of eggs in incubators was down 6 percent on February 1.

As supplies have tightened, turkey prices, which had declined to 1998 levels in 2003 rebounded sharply in 2004. Prices for Eastern hens in 2004 averaged 69.7 cents per pound, their highest level since 2000. As only moderate production gains are forecast in 2005, prices are forecast at 69 to 73 cents per pound.

The export outlook for turkey is positive in 2005, with an increase of 15 percent to 510 million pounds expected. Despite increases in sales to Mexico, the largest market for U.S. turkey, 2004 exports fell about 8 percent as sales to China/Hong Kong were restricted over concerns about Avian Influenza. With an expected recovery in sales to this market and continued growth in sales to Mexico, exports in 2005 are likely to exceed 2001's record.

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Source: USDA Agricultural Outlook Forum 2005 - 25th February 2005