Higher costs have driven large cuts in eggs in incubators and poultry placements all year. Neither of these important output indicators have been larger than one year ago since November 2012. Turkey eggs in incubators have been as much as 12.9 per cent smaller than last year (June) and were still down 3.4 per cent from year-ago levels on September 1 according to last week’s Turkey Hatchery report. Poult placements (see the chart below) were down 10 per cent or more from March through July before getting to “only” 4.3 per cent lower than last year in August. The sector has obviously been responding to losses by cutting output — the only way a commodity business can push prices higher.

But along the way it encountered a HUGE price challenge this summer that still has us and some industry participants baffled.

USDA’s Economic Research Service reported that the average retail turkey price dropped by 20 cents per pound ($1.595 to $1.3910) from June to July. That 12.8 per cent one-month decline is the third largest for any species in any month since January 2000. The two larger one-month drops were both for turkey but they both occurred in November of their respective years — a month in which one would expect average retail turkey prices to fall due to heavy holiday featuring. What’s more peculiar about the decline is that the average retail turkey price jumped 19.6 per cent to $1.663 per pound in August. What’s the deal? From everything we can gather, it is not a data problem. We have checked to make sure our data reflects official USDA data and we are confident that the people at ERS would have taken a careful look at changes this large. The question now is whether lower supplies this fall will drive sharply higher retail prices or whether whatever happened in July will linger and negatively impact turkey values this fall. This year’s placement pattern suggests sharply lower year-on-year slaughter through year-end, implying higher turkey prices if demand holds.

Friday’s Cattle on Feed report from USDA is expected to show sharply lower placements and feedlot inventories compared to one year ago. That is the findings of Dow Jones monthly pre-report survey of livestock market analysts, the results of which appear at right. And readers should know that some other surveys found numbers even lower than these! Not by much but lower none the less.

The 91.6 per cent-of-last-year average forecast for August placements would mean that only 1.838 million head were placed last month, the lowest August figure on record by 155,000 head, breaking the previous record low for August in 2005. And the actual figure could be even lower as is indicated in the red-tinted box in the chart which represents the range of analysts estimates. The 93.5 per cent estimate for feedlot inventories would put the September 1 figure at 9.995 million head, the lowest monthly inventory since August 2010. We will abstain with the analysis until the actual numbers are available at 3:00 EDT on Friday afternoon but suffice it to say that fed cattle supplies will very likely remain VERY tight for the foreseeable future. But what’s really new about that?