USDA is currently forecasting broiler production in 2013 to be just under 1 percent less estimated output in 2012, but the “amount and duration of the decrease” will depend on the health of the domestic economy, the level of competing protein prices, and the strength of exports demand, according to the “Livestock, Dairy, and Poultry Outlook” report released this week from the department’s Economic Research Service (ERS).
Earlier this month, USDA revised upward its broiler production forecast for 2013 as analysts expect lower feed prices to lead to more broiler pounds. ERS noted that total broiler production has been “boosted” by heavier average weights during six of the first eight months of this year. For January through August 2012, the average weight was 5.82 pounds, 0.6 percent more than during the first eight months of last year.
Lower cold storage inventory of most broiler parts have provided price support for these products. In the northeastern U.S. market, the September wholesale price for boneless-skinless breast meat averaged $1.40 per pound, up 7 percent from a year earlier, and the price for breast meat with ribs was 16 percent higher. “Very strong” prices for whole wings, averaging $1.89 per pound in September were up 80 cents (73 percent) from the 2011 level. Wholesale prices for bulk leg quarters were $0.52 per pound in September, down 2 percent from the previous year.
With total meat production and ending stock levels both expected to be up slightly in fourth-quarter 2012 compared with a year earlier, prices for many broiler products are expected to face some downward pressure, ERS said. The extent of this pressure will depend on beef and pork prices and economic conditions, the report said.
Looking ahead at when the cattle cycle may begin to turn, ERS pointed out that retention of replacement heifers, when that begins to happen, will further reduce feeder cattle supplies as decisions to begin increasing cow inventories are made. It is likely, however, that beef-cow herd expansion will be limited until feed grain supplies increase and prices decline to levels that will allow at least the anticipation of positive margins for cattle feeders, packers, and retailers.
Looking at pork, ERS said that the recent report showing a reduction in farrowings and breeding stock reflects what most observers have already identified. That is, the effects of the summer 2012 drought on the U.S. feed crop have led to farmers’ intentions to reduce hog production in 2013 and thus to require fewer farrowings. While 2013 feeding margins have recovered somewhat since September, margins still remain narrow relative to expectations earlier in 2012. Hog farmers have thus decided to farrow fewer sows in 2013 than in 2012. While the number of pigs per litter is expected to continue to grow in 2013, the reduction in farrowings will more than offset the efficiency gains in sow litters, and the 2013 pig crop is expected to be lower than the 2012 pig crop.
ERS analysts also commented on the condition of the corn corp and related developments. Analysts noted that reports of aflatoxins in harvested corn appear to be inconsistent. Several states were granted permission to blend affected grain, subject to final-use requirements. Blended aflatoxin corn will affect feed efficiency in all livestock species, especially hogs and poultry. However, discounts for such corn could help offset efficiency losses. At the same time, advanced ethanol production technologies are reducing the energy content of distillers’ grains and other co-products, lowering the energy feeding value of these co-products, particularly for hogs and poultry.
The large forecast crops in Brazil and Argentina, combined with reduced availability of energy from feed grains and ethanol co-products in the United States, is expected to lead to increased feedgrain imports to partly help meet U.S. feed-energy needs, ERS concluded.