Although there is always a difference in the absolute number of broiler eggs placed in incubators and the number of broiler chicks placed for growout, the difference in the two data series for the five-week-moving averages for recent weeks is normally not this wide, USDA’s Economic Research Service (ERS) reported in this month’s Livestock, Dairy and Poultry Outlook. The differences in the two series could result in a significant variation in the number of broilers reaching market size over the next seven to 10 weeks, ERS analysts said.
The most recent weekly broiler hatchery report seems to indicate a divide between the number of eggs placed in incubators and the number of chicks placed for growout over the last several weeks. Over the last five weeks (October 5 through November 2), chicks placed for growout averaged 157.1 million per week, only 1.5 percent higher than in the same period in 2012. For the 5-week-moving average, three weeks earlier, eggs placed in incubators averaged 191.1 million eggs per week, 3.1 percent higher than during the same time period the previous year, the report noted.
ERS also said that declining prices for some broiler products do not seem to be linked to changes in the cold storage holdings. Stocks of breast meat at the end of September were lower than the previous year, but prices for such products as boneless-skinless breast meat have fallen sharply over the last several months. In May, prices for boneless-skinless breast meat averaged $1.95 per pound, but by October prices had fallen to $1.32 per pound. Weekly prices at the beginning of November seem to indicate that prices have fallen into the high $1.20’s per pound.
ERS is forecasting “somewhat lower” prices for whole broilers and broiler parts for next year. In addition, higher cold storage holdings have also placed downward pressure on certain parts prices. For example, wing prices in October averaged $1.47 per pound, 23 percent lower than at the same time in 2012. Weekly wing prices in early November have continued to move lower, most recently to around $1.28 per pound.
Although cold storage holdings for wings were up considerably from the previous year, they were down over 12 million pounds from a month earlier as McDonald’s roll out of wings in their restaurants pulled down stock levels when the product moved from storage to stores. Whole broilers and leg quarters increased in cold storage holdings. However, breast meat decreased 15 percent), legs decreased 47 percent, and “other products” decreased 17 percent. In 2014, cold storage holdings are expected to be higher in the first quarter but then become similar to their 2013 levels throughout the rest of the year, the report said.
The ERS report also said that given the long lag between the decision to expand the beef herd and the increase in beef production, annual fed beef production is not likely to begin increasing above recent and current levels until 2017 or later. With the drought impacting available feed sources, relatively few beef heifers were likely to have been retained from the 2012 calf crop. More will be retained from the 2013 and subsequent calf crops unless drought again becomes a concern. However, as these calves mature, they will likely not add much to total beef supplies because of the relatively small size of the calf crop from which they came. Replacement heifer calves from the 2013 calf crop will be retained over the winter, bred in 2014, will calve in 2015, and their calves will begin to contribute to beef production probably no sooner than the last half of 2016. Again, it is not likely that their numbers will contribute much to expanding total beef production, ERS estimated.
Estimated average monthly retail prices for beef are not expected to exceed third quarter average prices before the end of 2013. Beef demand will take a seasonal break as consumers turn toward turkey, ham, and lamb for the coming holidays. On the plus side, positive economic reports will improve consumers’ willingness to spend for beef. After holding relatively steady at or near record levels for the remainder of 2013, retail beef prices are expected by ERS to increase into next year and remain generally strong-to-higher over the next few years, largely because of anticipated lower inventories of both fed and nonfed cattle and subsequent reduced beef production.
Comparing the retail beef price situation to pork, the report noted that the most recent retail price data available shows that pork prices set all-time highs in July and then again in August. In July, the pork retail price was $3.63 per pound compared with $3.43 in July 2012 and $3.76 per pound in August, compared with $3.53 in August 2012. In both July and August, the total farm-to-retail spread widened considerably compared with a year earlier. The July 2013 total spread was $2.38, compared with $2.23 a year earlier and the August total spread was $2.54 compared with $2.43 a year earlier. In each case, while both components of the total spread widened (the wholesale-to-retail component and the farm-to-wholesale component), the wholesale-to-retail component increased the most, meaning that some portion of increased total supply chain costs was passed along to consumers. It is possible that record-high retail beef prices emboldened retailers to increase pork prices, on the assumption that even, if they raised pork prices, consumers who treat beef and pork as substitute goods would still pay less per pound for pork than for beef, ERS concluded.
