Most broiler parts prices are expected to sustain “some downward price pressures” in the months ahead as USDA has revised upward its outlook for broiler production and stocks, according to this month’s edition of the “Livestock, Dairy and Poultry Outlook” report from USDA’s Economic Research Service (ERS). 

Broiler production for both the second and third quarters of 2012 were revised upward as the decline in eggs set diminishes and weights continue to increase. The estimate for the second quarter was increased by 200 million pounds to 9.3 billion, and the third-quarter estimate was increased by 100 million pounds, also to 9.3 billion. With these changes and a small adjustment to the first-quarter production, the estimate for 2012 was increased to 36.9 billion pounds, down slightly (0.8 percent) from 2011. The increases in broiler meat production in the second and third quarters are expected to come from a combination of a higher number of birds slaughtered than originally expected by ERS and higher average broiler weights. ERS noted the average meat yield per broiler during April this year was 4.38 pounds, up 1.2 percent from April 2011.

Lower broiler meat production in the second half of 2011 and through the first quarter of 2012, along with strong exports, resulted in declining frozen product inventory levels. Broiler stock levels are expected to increase somewhat in the coming months to accommodate increases in production estimates. The forecasts for the second-, third-, and fourth-quarter 2012 ending stocks were all increased by 25 million pounds. Even with these increases, ending stocks are expected to be below the previous year until fourth-quarter 2012, the report said.

Wholesale prices for many broiler products peaked a week or two before Memorial Day and have declined since then. During May, prices for broiler products were higher than the previous year, but the difference was smaller than at the start of 2012. One of the few products not following this overall pricing pattern is broiler wings. In January 2012, wholesale prices for broiler wings were 69 percent higher than the previous year. However, wing prices have not followed their normal seasonal pattern of peaking in early February and then declining. By May, wing prices had only fallen by 7 cents per pound from their January peak and were 120 percent higher than in May 2011.

ERS reported that dry conditions are spreading to the North and West and expanding in the Southeastern United States, causing consternation among crop and livestock producers as far north as the Corn Belt and increasing the flow of lighter cattle off pastures. Drought-induced feeder cattle exports from Mexico are entering the United States at a higher rate than they were at this point in 2011. Although well below 2011 levels year-over-year, weekly estimates of federally-inspected other (beef) cow slaughter have also increased from mid-April lows, ERS said.

Analysts said that for 2012, hog slaughter is likely to increase almost 2 percent with dressed weights higher than last year. Both of these factors contribute to a 2012 commercial pork production forecast of 23.4 billion pounds, almost 2.7 percent above production in 2011. Second-quarter average prices for live equivalent 51-52 percent lean hogs are expected to be $59-$60 per hundredweight, almost 14 percent below the same time last year. For 2012, the expected average hog price is $59-$61 per hundredweight, almost 9 percent below 2011.

Pork exports should remain strong, at least for three top U.S. markets.  Mexican demand for U.S. pork is robust and likely reflects the tight Mexican feed grains balance sheet. For Russia, continued trade disputes with Brazil are likely a factor driving Russian demand for U.S. pork. Chinese imports of U.S. pork products in April were almost three times higher than a year ago. Assuming that Chinese orders for U.S. pork placed in fall 2011 were shipped by the end of first-quarter 2012, it appears that China is maintaining a more pronounced profile in the U.S. pork market than in the past several years. After the first half of 2008, when China had taken delivery of a large set of purchases, its demand for U.S. pork fell dramatically and persisted at very low levels until mid-2010. Given the volume of recent purchases, however, Chinese imports of U.S. pork appear to have stabilized at a much higher level than in the past, the report concluded.