Prices for “most broiler parts” are expected to continue to move higher through the end of 2012 and into 2013, according to the “Livestock, Dairy and Poultry Outlook” report this week from USDA’s Economic Research Service (ERS). Broiler processors are expected by ERS to lower production in reaction to much higher grain prices, the report said.
Supporting the move toward better prices are two factors–generally lower broiler production and continued strong export demand. In addition, broiler stocks have been steady for the last three months. Prices for whole broilers averaged $0.83 per pound on the New York market in August, up only slightly from July but 2.5 percent higher than the previous year. Prices in August were about even with the previous year for parts such as leg quarters (up less than 1 percent) and boneless-skinless thighs (down fractionally). However, wholesale prices for boneless-skinless breast meat in the Northeast market averaged $1.45 per pound in August, 12 percent above the previous year, and prices for wings continue to be very strong, averaging $1.86 per pound in August, up 92- percent from a year earlier.
ERS said that some current industry anecdotes suggest beef packers may be having difficulties finding enough finished cattle to meet their needs, which should be supportive of prices, except that packer margins will decline from the higher fed cattle prices combined with static or declining wholesale values.
At the same time, evidence supporting a possible buildup includes higher dressed weights, a larger number of cattle on feed for more than 120 days, and higher dressing percentages. While dressed weights are increasing seasonally, they are well above a year-earlier levels and are not likely to peak until around mid-October when they traditionally peak. Another indicator is the record number (since August 1996) of cattle on feed for 120-plus days on August 1, which–in addition to any remaining calf-feds—may indicate larger than usual numbers of heavyweight fed cattle that could be marketed over the next few months. These numbers could be a result of the many heavy feeder cattle placed earlier this year and the large numbers of under-600-pound feeder calves placed in late 2011. A third indicator is the five-day average dressing percentage, which has been above year-earlier and recent historical levels for most of the summer and, despite the driving forces of the drought, runs counter to the traditional logic associated with abbreviated feeding periods during periods of high grain prices.
ERS reported that despite drought-induced record-high corn and soybean meal prices, sow slaughter data suggests that hog producers are not “sprinting towards the exits.” For July, while sow slaughter was 5.7 percent above the July 2011 level, it was 3.2 percent below the three-year average July sow slaughter and 8.4 percent below the five-year July average. Record-high feed costs are expected to gain traction, and pull dressed weights in the first three quarters below those of the same period of 2012, as producers push to minimize feed costs while avoiding packer discounts for low-weight animals.
