During the rest of 2013, three important factors are expected to influence the broiler industry, according to the “Livestock, Dairy, and Poultry Outlook” from USDA’s Economic Research Service (ERS) this week. The first factor is that broiler integrators are evaluating the prospects of normal corn and soybean crops this year, which would be expected to result in declining feed costs. Second, some improvement is expected in unemployment rates and real disposable income, which along with declining prices, would boost meat consumption. Third, the demand for U.S. poultry exports continues to be relatively strong, ERS said.
Regarding cold storage inventories of the various chicken parts, ERS noted that some stock changes seem to have had no impact on prices, while other stock changes seem to have had a definite impact. One example, ERS said, is cold storage holdings of whole broilers, which totaled 16 million pounds at the end of February, 17 percent higher than the previous year, while wholesale prices rose. On the other hand, stocks of wings jumped to 63 million pounds (up 86 percent), and prices began falling in mid-February and continued to decline in March.
With a small increase in the production forecast for first-quarter 2013, the forecast for ending stocks was also increased, by 20 million pounds to 595 million, a gain of 9 percent from a year earlier. The outlook for continued growth in broiler production in the second half of 2013 was also the chief cause of an increase ERS sees in the ending stocks in its forecast for 2013 to 635 million pounds. This level, however, is still 2 percent lower than at the end of 2012 as competitive prices for broiler products are expected to expand domestic consumption, ERS explained.
Larger hog numbers and increased pork production come at a time when the prices of both hogs and wholesale pork have lagged year-ago levels almost since the beginning of 2013. The increased pork supplies, coupled with weakness in foreign demand for U.S. pork products, would make for a “grim outlook except for prospects of imminent relief from high feed costs.” With “realistic prospects of lower corn prices, hog producers appear to be looking past the currently grim situation,” toward a market environment where lower feed costs improve negative production margins and attractive wholesale pork prices spark both domestic and foreign pork demand, the report concluded.
