Higher broiler meat production in fourth-quarter 2012 and expected higher production during first-quarter 2013, coupled with relatively high inventory levels for certain chicken parts, is expected by USDA to place downward pressure on wholesale prices. Prices will also be effected by relatively high stock levels, according to the “Livestock, Dairy, and Poultry Outlook” report issued yesterday by the USDA’s Economic Research Service (ERS). The impact these factors have on prices could vary considerably depending on the various broiler parts and will also be effected by price changes for other meats and the strength of the export market, the analysts explained.
In February, the national whole broiler price was $1.02 per pound, up 15 percent from the same period in 2012, and by the second week of March, prices had risen to $1.07 per pound. Prices for many other broiler products were also higher.
Wholesale prices for boneless-skinless breast meat in February in the Northeast market averaged $1.40 per pound, up 14 percent from same period the previous year. Prices for boneless-skinless thigh meat were $1.31 per pound, an increase of 5 percent over February 2012. Even with a strong export market in fourth-quarter 2012, prices for many broiler leg products in February were lower than at the same time in 2012. Leg quarter prices were $0.50 per pound, down 5 percent from the previous year, and prices for thighs and drumsticks were also lower.
The lower prices for leg quarters and thighs is likely a reflection of higher stock levels for these products, but stocks of drumsticks going into February were down significantly from the previous year, ERS noted. Ending stocks for 2012 were estimated at 651 million pounds, 10 percent above those of the previous year. The increase in stocks was the result of higher production in fourth-quarter 2012, as exports rose slightly. Higher broiler meat production is forecast throughout 2013 and is expected to result in higher ending stocks in the first two quarters of 2013, the report said.
Stocks of broiler products at the end of January 2013 totaled 631 million pounds, 10 percent higher than the previous year. Stocks of most broiler products were well above their previous-year levels, the only exceptions being drumsticks and “other” products. Stocks of wings were 59 million pounds, up 66 percent from a year earlier, but did not seem to impact wholesale wing prices that averaged $2.06 per pound in January, 12 percent higher than a year earlier. Stocks of whole birds, breast meat, legs, and leg quarters all increased significantly compared with the previous year, while stocks of thighs and thigh meat were up by smaller amounts, ERS noted.
Te report also said that cattle on feed for more than 120 days (adjusted) are currently at the second highest level since the series began in 1996. This situation suggests that there are still cattle that should come to market in sufficient numbers to exert downward pressure on fed cattle prices and likely on wholesale cutout values as well. Cattle feeders have experienced negative margins since March 2011. Even futures prices have not offered cattle feeders the possibility of positive margins, which are unlikely with cattle feeding costs in the mid-$130 per hundredweight range that are expected to continue at least until anticipated lower new-crop corn prices begin to mitigate feed costs. Feeder cattle prices are expected to rise and will largely offset expected lower 2013/14 corn prices, which could lead to continued cattle feeding losses into 2014, ERS said.
The report also said that lower retail pork prices are also reflected in a lower wholesale-to-retail price spread. Lower retail prices and corresponding price spreads suggest that retailers are finding it necessary to lower prices in order to move pork supplies.
There are a number of factors that affect how much animal protein consumers decide to buy. These factors include, among others, higher payroll taxes and higher gasoline prices. Weaker foreign demand for U.S. pork products could benefit domestic pork consumers. If lower foreign demand pressures wholesale pork prices, retailers could pass along those lower wholesale prices. However razor-thin retail margins associated with currently high-priced beef may limit what retailers choose to fully pass along to pork consumers in the form of lower retail pork prices, the report concluded.
