With an increase in cold storage holdings of chickens in July and the forecast for greater broiler production in the third and fourth quarters, USDA’s Economic Research Service (ERS) is forecasting ending stocks to increase to 635 million pounds at the end of September and move even higher to 650 million pounds at the end of 2013, according to the “Livestock, Dairy and Poultry Outlook” report this week from ERS. Looking further ahead, ERS expects this pattern to continue in first-quarter 2014, with ERS raising its estimate to 635 million pounds.
Stocks of broiler products at the end of July totaled 654 million pounds, 6.4 percent higher than a year earlier. Over the last four months, stock levels have bounced back and forth between about 635 and 650 million pounds. The increase from the previous month was almost entirely because of higher stocks in three categories. Stocks of whole birds rose over 6 million pounds from the previous month, reaching 21.7 million pounds, 65 percent higher than the previous year. Stocks of leg quarters rose to 147 million pounds, almost 50 percent higher than the previous year and 9 million pounds higher than at the end of June. The third category with a major increase was wings. At the end of July, wings stocks had risen to 94 million pounds, up 10.6 million pounds from the previous month and nearly 89 percent higher than in July 2012.
Higher stocks of whole birds had been anticipated as prices for them had been gradually declining for some time. The large increase in cold storage holdings for leg quarters is a different story as wholesale prices have been relatively unchanged for the last several months, staying within a narrow range of $0.50 to $0.54 per pound. The increase in leg quarter stocks may not have triggered a decline in prices, as exports of broiler products have been strong so far in 2013 and exports of leg quarters in July totaled 159 million pounds, about the same as in 2012.
Cold storage holdings of wings have increased almost continually since the beginning of the year. Part of the increase, especially in recent months, may be tied to a buildup of stocks before the national rollout of wings at McDonald’s in late August. The chain announced that it would put wings on the menus of all its domestic restaurants for a limited time. The announcement stated that the rollout would be nationwide by September 24. The new wing product is expected to remain on the menu through November, ERS noted.
ERS also reported that fewer cows in the slaughter mix—especially beef cows—could result in heavier average dressed weights of all cattle through the end of 2013. Large inventories of market-ready fed cattle could put negative pressure on fed-cattle and beef prices through the end of 2013. However, retail beef prices could remain in record or near-record territory, the report said.
Total August 2013 monthly commercial cow slaughter will likely show a sharp decline from the August 2012 level. Thus far, the decline appears sharper for beef cows than dairy cows. However, if the “flash drought” in the Central United States persists, it could result in more cows going to slaughter and could temper any expansionary plans to retain beef cows or replacement heifers through the winter, as well as slowing or even reversing the decline in cow slaughter, ERS explained.
Monthly retail beef prices set successive new records in July and August. August retail Choice beef prices reached $5.39 per pound, and all-fresh beef reached $4.97 per pound. Although beef prices are lending some support to pork and poultry prices, pork and poultry are in such abundant supply that they are likely to dampen continued upward movement in beef prices, especially with the seasonal decline in summer grilling demand. Despite the price-dampening pressure from competing meats, generally declining year-over-year beef supplies will result in retail beef prices that are likely to remain near current levels for some time, ERS added.
ERS said in the second half, both pork production and hog prices are expected to be year-over-year higher, indicating strong demand for pork. With July pork exports year-over-year higher for the first time this year, it appears that foreign demand for U.S. pork is rebounding and likely contributing to strong pork demand. While high domestic prices of competing animal proteins—beef and poultry prices in particular—are almost certainly a factor in supporting strong pork demand, foreign demand for U.S. pork appears to be rebounding. July pork exports were higher than a year ago, by 2.1 percent, for the first time in 2013, the report noted.
