CME: US Broiler Industry Still Hampered
US - CME's Daily Livestock Report for 28 January 2009.The US broiler industry continues to be hampered by poor
foodservice sales, the bankruptcy of its largest operator as well as
the hangover of hedging grain costs last summer. Having said
that, it is important to point out that the sharp deceleration in
growth appears to be having an effect. The industry began to
cut back the number of chicks placements for grow out last fall.
Since then, the 12 city broiler value, a composite price of
whole bird carcasses, has appreciated by more than 15 per cent
and currently is trading 10 per cent above year ago levels. Keep in
mind that the broiler price today is a reflection of chick placements
about 12 weeks ago.
USDA released its latest update on egg sets
and chick placements on Wednesday afternoon, which showed that
the industry continues to cut back on supplies. Egg sets were
pegged at 201.358 million, 7.5 per cent less than a year ago. For the past
6 weeks, egg sets have been on average 6.8 per cent lower than a year ago.
Chick placements for the week ending 24 January were pegged at
167.7 million, 5.6 per cent lower than a year ago.
In the past six weeks,
chick placements have averaged 5.7 per cent below year ago levels. The
latest data implies that the reduction in broiler supplies will continue
at least through the first quarter and should help bolster
prices for whole broilers and broiler parts. The price of chicken
breasts will be a good barometer as to how quickly the industry
returns to profitability (some may already be there). Chicken
breast prices were trading some 20 per cent below year ago levels back in
November (even when whole broiler prices were posting strong year
over year increases).
Since the beginning of the year, however,
chicken breast values have increased some 30 per cent and are currently
at par with year ago levels. As chicken breast prices move up in
value, this should be supportive of other meat items that compete
directly with chicken breast meat in the retail counter, especially
pork chops, ground beef and lower valued beef cuts. Chicken export
markets continue to be very important. If exports languish, it
would cause leg quarter prices in 2009 to be much lower than in
2008, in turn causing broiler producers to maintain their conservative
stance on growth and further supporting prices for competing
meats. Chicken remains the most widely available meat protein in
the US and cutbacks in production, when coupled with reductions
in beef and pork supplies will tend to put a floor underneath meat
protein values.
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