Broiler production next year is now forecast to be 36.500 billion pounds, 2.1 percent less than the 37.293 billion pounds estimated for this year, according to the “Livestock, Dairy, and Poultry Outlook” report this week from USDA’s Economic Research Service (ERS). In last month’s outlook report, ERS forecast the year-over-year decrease to be 1.7 percent.  Broiler production during the first quarter 2012 and second quarter 2012 are expected to decrease 5.3 percent and 4.2 percent, respectively.

ERS said that corn prices are most likely to be “relatively high” for the remainder of 2011 and into 2012.  With relatively weak prices for most breast meat products, broiler companies are expected to scale back production through much of 2012.  The number of chicks being placed for growout continues to be well below that of the previous year.  Over the last five weeks, (November 5 to December 3), chick placements have averaged 154 million, down 6.6 percent from the same period in 2010.  Chick placements are expected to remain below levels of a year earlier through the first half of 2012 and gradually pull even with and then exceed year-earlier levels in the second half of 2012, the report noted.

If broiler production in 2011 is 37.293 billion pounds, the increase over 2010’s production would be 1.0 percent.  Average broiler weights in November and December are expected to continue higher when the Department’s National Agricultural Statistics Service data is published.  However, ERS sees the rate of growth toward heavier broilers being “much slower than it was over the first three-quarters of 2011.”

Wholesale prices for most all broiler products were higher in November than a year earlier.  The one exception was whole broilers, which are still “considerably lower” (down 6 percent).  Strong exports continue to place upward pressure on leg quarter prices (up 31 percent) and other leg meat products such as boneless-skinless thighs (up 27 percent) and whole thighs (up 44 percent).  The forecast for lower broiler production levels through the first half of 2012 are expected to gradually place upward price pressure on most all broiler products.  Whole bird prices are expected to be at 77 to 78 cents per pound in the fourth-quarter 2011, down 3 percent from the previous year.  However, prices in 2012 are expected to increase and be above year-earlier levels throughout next year.

ERS reported that, despite the high fed cattle prices, profit margins for feedlots have stayed at breakeven levels or lower, in some cases much lower.  In addition, cattle feeders continue to place expensive feeder cattle in anticipation of higher fed cattle prices in 2012, when supplies of fed cattle are expected to become scarce.  However, fed cattle supplies will likely continue at or near current levels until sometime during the first half of 2012 because of the large numbers of liveweight feeder cattle that were placed on feed during the last half of 2011.  These fed cattle will likely be marketed during the first half of 2012.  Packer margins are negative at a time when they typically recover.  Negative margins have driven packers to reduce slaughter numbers somewhat and have dampened their willingness to continue to pay the record and near-record-high prices for fed cattle, ERS explained.

Analysts expect pork products available to the domestic U.S. market, evaluated in terms of retail weight per capita quantities, are likely to be year-over-year larger next year for the first time since 2009.  With higher domestic availability, the average 2012 price of live-equivalent 51-52 percent lean hogs should decline about 1.6 percent, averaging $63-$68 per hundredweight compared with $66.32 per hundredweight in 2011.  Further declines in hog prices are likely to be checked by lower 2012 expected poultry production and sharply lower 2012 beef production (-4.6 percent).  Substitution effects from higher retail prices for poultry and beef prices should keep 2012 retail pork prices in the high $3.40s per pound, ERS concluded.