Poultry Outlook Highlights
John C. McKissick
Extension Economist - Livestock
The University of Georgia
Poultry Outlook Summary
-By mid year 1998 all segments of poultry production were profitable with broilers registering some of the most profitable margins ever.
-While profit margins will be tighter in 1999, all segments of poultry have a good chance for profitability again but turkey margins will be borderline.
-1998 broiler production registers smallest year- to- year increase (2%) since 1982, 1999's broiler production to be limited by breeder flock problems - perhaps 4% growth.
-Broiler exports to show little or no growth in 1999 as Russian meltdown and Asian woes limit prospects.
-1999 broiler margins will remain profitable but smaller than in 1998 as feed cost decline along with product prices.
-Turkey production down 2% during holiday season 1998, steady in 1999.
Turkey exports show sharp drop. Turkey profit margins tight, but slightly
positive due to declining feed cost.
-Egg production up 3% in 1998 and 1999. Egg producer profit string to
reach 4 years in 1999.
Broilers
Production
Due in part to industry planning, in part to weather, and in part to disease problems in the breeding flocks, broiler production during 1998 will register its smallest percentage growth since 1982 at 27800 million pounds or approximately 2% more than production in 1997. Just as companies planned to hold the line on production during the first of 1998 in response to tight margins in prior years, the summer's heat cut into production even more. By late summer wholesale broiler prices were in the $70's. Profits were augmented even more as feed prices dropped some 20% below their 1997 levels. The results - some of the best industry margins in recent years.
It is expected that by the fourth quarter of 1998, production will recover
enough from the summer heat to show about a 4% gain on 1997's fourth quarter
production. USDA currently projects 1999 production to return to the 5%
growth trend of the last 10 years. In light of the profitability experienced
in 1998 and with feed cost looking to be at the lowest levels of the past
4 years, it would be hard to imagine the industry holding the line on production.
If not for the J-virus problem in the breeding flocks, odds would favor
a 1998 production increase in the 6%-7% range. However, it may not be possible
to reach even a 5% growth in 1999.
Demand
1999's exports will likely show little growth over 1998 as the Asian
and Russian economic crisis and large competing meat supplies limit export
growth opportunities. Since exports represent about 18% of domestic production,
export conditions will be key to broiler prices over the next year.
Prices and Returns
Wholesale broiler prices will likely average in the upper 50 cents per
lb. range during late 1998, about 4 cents higher than at the end of 1997.
Prices are expected to remain above year earlier levels through the first
part of 1999. By the second quarter of 1999, broiler prices are likely
to fall behind 1998's pace by 2 to 4 cents per lb. For the 1999 year as
a whole, broiler prices are expected to average around 57 cents per lb.
as compared to 1998's likely average of about 60 cents per lb. While 1999
broiler production returns will not be as large as those experienced in
1998, they will remain comfortably in the black provided feed cost continue
at low levels.
Broiler Outlook Summary
| 1997 | 1998 | 1999 | |
| Broiler Production
Mil. Lbs. |
27,271 | 27,797 | 28,900 |
| 12 City Price
Cents/Lb. |
58.8 | 62.5 | 59 |
| Yearly Cost of Production
Cents/Lb. |
53 | 49 | 47 |
Turkeys
Production
After two and a half years of losses, turkey producers reduced production in 1998 by about 1%. Thanks to the decline in feed cost and the smaller production, producers found themselves slightly in the black by mid year. Holiday turkey production during the last of 1998 will remain some 2% below 1997's production. Turkey production is not likely to exceed year earlier production levels until the middle of 1999. For the year as a whole, production in 1999 looks like it will equal 1998's production.
Demand
Turkey exports declined about 12% during 1998 due to a near total collapse
of exports to Hong Kong. Some export growth is forecast for 1999 with strong
growth again occurring in the Mexican market. Turkey exports will consume
about 10% of domestic production in 1998 and 11% in 1999. Domestic demand
will follow the sluggish pattern exhibited in 1998 as large pork supplies
continue to pressure turkey markets.
Prices and Returns
Turkey prices were almost 5 cents per pound lower in the third quarter of 1998 than in 1997. Prices for the holiday quarter may about equal 1997's levels. For the year as a whole, prices will be off about 4 cents from 1997's 64.9 cents per lb. average. 1999's average price may about equal 1998's average provided production does not expand beyond 1998's levels. The marginal profitability found by producers in mid year 1998 may well extend into 1999.
Turkey Outlook Summary
| 1997 | 1998 | 1999 | |
| Turkey Production
Mil. Lbs. |
5,478 | 5,311 | 5,300 |
|
|
64.9 | 60.5 | 62 |
| Yearly Cost of Production
Cents/Lb. |
68.70 | 62 | 59 |
Eggs
Production
Egg production will increase by about 3% in 1998. Large increases in
chicks hatched for table egg production signal that another 3% increase
is likely in 1999.
Demand and Usage
Egg and egg product exports were about 1% higher for the first of 1998
than in 1997 due to higher shipments to Canada and Mexico. For the year
as a whole, exports are expected to climb 5% over 1997's levels. 1999 egg
exports are forecast to grow only modestly. Egg exports represent only
3%-4% of production and will be a minor factor in moving a larger egg supply
over the next year.
Prices and Returns
Egg prices will be 8 to 9 cents per dozen lower in the latter half of
1998 as compared to the year earlier, but due to declining feed cost will
continue the string of profitable prices begun in 1995. If production gains
are held to forecast levels, prices in 1999 will only decline 1 to 2 cents
per dozen from 1998's prices. The combination of low feed cost and modest
production gains should result in 1999 becoming the fourth full year of
profits for egg producers.
Egg Outlook Summary
| 1997 | 1998 | 1999 | |
| Egg Production
Mil. Dozen |
6,460 | 6,632 | 6,830 |
| Grade A, New York Price
Cents/Doz. |
81.21 | 74 | 72 |
| Mid Year Cost of Production
Cents/Doz. |
72.57 | 66.03 | 64 |
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