With higher year-over-year increases in broiler production likely during the third and fourth quarters this year, there will be a generally depressing impact on wholesale broiler parts prices, according to the “Livestock Dairy and Poultry Outlook” report last week from USDA’s Economic Research Service (ERS). However, a strong export market and a generally improving U.S. economy may offset the impact of stepped up output. The increase in production in the second half of 2013 will likely come from gains in both the number of birds slaughtered and average live weight per bird.
With lower grain prices expected later in 2013, broiler producers are apparently planning to expand production in both the third and fourth quarters of 2013 and into 2014. The ERS estimate of broiler meat production for the second half of 2013 is for a 3 percent gain over last year. Factors pointing toward this increase include a higher number of hens in the broiler breeder flock and higher numbers of both eggs being placed in incubators and chicks being placed for growout than in the same period a year earlier, the report said.
ERS reported that, as the drought continues in the Western and Southwestern States, cow slaughter has remained at relatively high rates. At the same time, weekly feeder cattle sales volumes were generally above year-earlier levels, averaging close to 2 percent above year-earlier sales. However, the tide turned during June when weekly sales volumes declined by more than 15 percent year-over-year. These developments imply inventory changes, which could foreshadow future declines in cow inventories, feeder cattle supplies, and ultimately beef production, ERS pointed out.
The prospect of larger-than-usual numbers of heavy placements in feedlots being market-ready later in the summer, and into the fall, has exerted downward pressure on both fed cattle prices and wholesale beef cutout values. Despite the recent declines and excluding February and March (when prices were lower year-over-year), monthly fed cattle prices have been higher year-over-year since January 2010. Cattle feeding margins have been negative since May 2011. The lower fed cattle prices have increased the likelihood of further losses to cattle feeders, despite declining feeding costs, analysts noted.
Carcass weights are beginning to increase again after reaching a seasonal low in mid May. While weights are expected to be higher year-over-year for the remainder of 2013, and into 2014, they may not be double-digit higher (in percentage terms) as they have been recently. The recent increases in dressed weights have been attributed to the positive effects of increased use of beta-agonist on final weights for about a year or so. Beta-agonist use is not likely to increase at the same rate as in the recent past, so weights should likewise not increase as much. However, it is possible that the greater placement of over 800-pound feeder cattle on feed could also result in heavier dressed weights, contributing to further relatively large year-over-year dressed-weight increases.
With respect to the pork outlook, the 2013 spring farrowings were 2 percent lower than a year earlier. The lower farrowings are noteworthy for several reasons. First, while farrowing intentions for spring 2013, reported in December 2012 and March 2013, were each lower than a year earlier, the intentions published in March indicated that producers expected to farrow only 1 percent fewer sows than a year ago. As a result, the 2-percent-lower actual farrowings reported in June were something of a surprise for the industry.
It is also worth noting that the March-May farrowings reported in June, as a proportion of the March 1 breeding inventory, are somewhat lower than a year ago. This year, 50.1 percent of the March 1 breeding herd farrowed in the March-May quarter. Last year, that proportion was 51.2 percent. The 3- and 5-year averages are, respectively, 50.8 percent and 50.4 percent, ERS said.
Record-high litter rates were reported for the spring pig crop in the June report. The reported litter rate for the March-May pig crop was 10.31 pigs per litter, the highest ever achieved by the U.S. pork industry. So while farrowings were lower than expected, the “sky-high” litter rate more than offset the fact that fewer sows farrowed. Higher spring litter rates are likely largely attributable to much-improved genetics and to better sow barn management. The fact that the breeding herd was not being pushed to maximize production, as suggested by the lower farrowing-to-breeding-herd ratio, may also have contributed to the record-high litter rate.
