Broiler production next year is forecast to increase 2.5 percent over 2012 but two “primary factors” will likely influence the output expansion, USDA’s Economic Research Service (ERS) reported in its “Livestock, Dairy, and Poultry Outlook” this month.  These two factors are “degree to which processors feel demand will reflect expansion in the general economy” and “what integrators expect for changes to corn and soybean prices.”

ERS sees stepped-up production from both a greater number of broiler and a “small increase” in average bird weight.  Significant relief is expected from high corn prices but relatively high prices for soybean meal will likely continue.  First quarter 2012 broiler production was down 2.2 percent from a year earlier and second quarter is expected to be off 4.3 percent.  Third quarter production could also decline about 3.6 percent before the fourth quarter experiences an uptick of 3.8 percent, the report estimated.

ERS reported that cattle feeders continue to experience negative feeding margins because of higher costs of feeder cattle and feed. Feed-grain prices are expected to moderate slightly through the spring and summer of 2012, but feeder cattle and soybean meal prices are expected to increase during the same period. Without a significant improvement in fed cattle prices and lower feed and/or feeder cattle prices, feeding margins will not improve. The situation does not appear likely to improve until later in 2012 or early 2013 when new-crop corn prices decline.  One factor offsetting lower new-crop corn prices is anticipated increases in feeder cattle prices over the remainder of 2012 and throughout 2013 in response to the “tightest feeder cattle supplies in decades,” ERS explained.

With respect to pork, ERS said “the only ones left smiling by the price and demand/supply metrics of first quarter may be pork retailers.”  All the other players in the pork market chain–hog producers, packer/processors, and wholesalers are feeling the impact of negative margins, ERS said.  At the same time, continued high retail pork prices are impacting consumers food budgets.  First-quarter retail pork prices were at $3.49 per pound, 6 percent higher than a year ago and the highest first-quarter retail price on record. Record retail prices reflected, in part, robust first-quarter U.S. exports, which were 15.8 percent higher than a year ago.  Tighter first-quarter domestic supplies and higher prices for competing animal proteins likely supported record retail prices, ERS added.