Chicken companies waiting for breeders to catch up
By Rita Jane Gabbett on 7/10/2014
A recent Reuters article reported fertility problems in a certain breed of rooster that Sanderson Farms was using and its impact on a chicken industry already having a hard time keeping up with demand.
Industry sources explained that the problem roosters added to an already complex supply and demand situation that started to unravel three years ago. The chicken industry could still be a year away from getting all the live birds it seeks to keep up with consumer demand for chicken products.
The problem started with $8-a-bushel corn in 2011 and a sluggish economy that pushed up the cost of production at the same time consumer demand plummeted.
"We [Sanderson Farms] cut back 6 percent, Tyson cut back, Pilgrim's cut back," said Cockrell, which resulted in fewer orders to breeder stock companies like Aviagen and Cobb-Vantress. This meant those companies ordered fewer breeder stock from their growers. Some of those growers retired or went out of business when demand for their product declines.
Over the past year, chicken demand has picked up dramatically in the face of more expensive beef and pork.
USDA estimates that chicken production this year will reach a record high of 38.1 billion pounds on a ready-to-cook weight basis. But that is only 1.8 percent above 2013 levels. Current favorable market conditions would normally stimulate a production increase more aligned with the long-run annual average of 4 percent.
"So, why are chicken producers not stepping up production to better match the long-term average of 4 percent? We would if we could, but we can't," Bill Roenigk recently told a congressional committee on behalf of the National Chicken Council.
Without sufficient breeder stock in the pipeline, Cockrell explained, it can take 18 months to rebuild breeder stock: 25 weeks for breeder stock grandparents to mature, another 25 weeks for the breeder parents to mature, then an additional 25 weeks for the breeders sold to growers to mature and become productive.
Industry executives have estimated it could be spring of 2015 before the industry will be able to produce a material increase in chicken products in the market.
In the meantime, the industry struggles with poorer hatchability rates as breeder stock that typically retired at 65 weeks are now being kept in production for 69 or even 70 weeks. The fertility and productivity of those birds can decline dramatically in those last weeks, according to Cockrell.
In fact, the USDA reported on Wednesday that broiler growers in the agency's 19-state weekly program placed 166 million chicks for meat production during the week ending July 5, 2014, down 1 percent from the year earlier. Cumulative placements from Dec. 29, 2013 through July 5, 2014 for the United States were 4.63 billion, down slightly from the same period a year earlier.
Add to all that – last winter's brutal cold. National Chicken Council spokesman Tom Super said the very cold weather this past February and a propane shortage that made it difficult to heat chicken houses also impacted fertility and hatchability.
A deep dive into North American cattle numbers
By Meatingplace Editors on 7/7/2014
By Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist
Record high feeder cattle prices leave no doubt that U.S. feeder cattle supplies are extremely tight.
On January 1, estimated feeder supplies were down 2.7 percent over the previous year amid indications of heifer retention. There are indications that heifer retention has accelerated in 2014.
USDA will release the July Cattle report in about a month, which will provide a mid-year estimate of feeder supplies, though no year over year comparisons will be possible since the report was cancelled last year. U.S. feeder supplies will likely be down again with a 2014 U.S. calf crop fractionally smaller than last year and increased heifer retention further squeezing feeder supplies.
However, the market attempts to compensate for declining supplies with high prices prompting adjustments wherever possible. U.S. veal slaughter continues to decrease, accelerating a long-term trend in recent years. Veal slaughter so far in 2014 is down 15 percent year over year, a pace that would result in annual slaughter that is down 21 percent from the previous 10-year average. High U.S. feeder prices also stimulate increased imports of feeder cattle from Canada and Mexico.
Canada
Cattle imports from Canada through April were up nearly 12 percent year over year. The imports reflect a changing mix of slaughter and feeder cattle with slaughter cattle down 3 percent and feeder cattle imports up 36 percent. This follows a 28 percent annual increase in Canadian cattle imports in 2013, consisting of 5 percent more slaughter cattle and a 113 percent increase in feeder cattle imports.
Changes in the mix of slaughter and feeder cattle imports from Canada partly reflect the impacts of the latest country of origin label (COOL) rules implemented in May, 2013 and partly the strong U.S. demand for feeder cattle. Despite the flexibility to shift between feeder cattle and slaughter cattle, there is a limit to total cattle imports from Canada. The Canadian beef cow herd is the smallest in 20 years and expected herd rebuilding there will limit feeder supplies in coming years.
Mexico
Reliable cattle inventory data is much harder to find in Mexico but there are strong indications that total cattle numbers have decreased significantly in the past few years including a sharp drop in the cow herd inventory.
Drought forced liquidation in 2011 and 2012 resulted in unsustainably large Mexican cattle exports to the U.S. Not surprisingly, U.S imports of Mexican cattle dropped by a third in 2013 compared to 2012.
The extremely strong pull of record U.S. feeder prices in 2014 has kept year-to-date imports close to year ago levels. The monthly import total through April was down about 2 percent year-over-year but the preliminary weekly data for May and June suggests that year to date Mexican cattle imports are about 5 percent higher than last year.
Decreased Mexican cattle inventories combined with growing domestic feeder cattle demand in Mexico due to the rapid expansion of feedlot production in the country suggests that current levels of Mexican cattle exports cannot be sustained in the short run and may be permanently reduced in coming years.
Heifer retention
In 2011 and 2012, lack of heifer retention due to drought, reduced veal slaughter and increased feeder cattle imports all contributed to temporarily maintaining U.S feeder cattle supplies. Starting in late 2013 and accelerating in 2014, the reality of a still smaller calf crop, increased heifer retention and limited cattle supplies in Canada and Mexico underpin current market prices.
Veal slaughter will likely drop a bit more but can only go so low; and the year-to-date 8 percent increase in feeder cattle imports from Canada and Mexico is unlikely to be sustained in the second half of the year.
Even the allure of record high cattle prices can only do so much when the cattle simply aren't there. Mexican cattle numbers are extremely tight and I expect U.S. imports of Mexican cattle to moderate in the second half of the year. Canadian feeder supplies will tighten as well though the timing is less certain.
Combined cattle inventories in North America are at the lowest level in decades and with herd rebuilding indicated in the U.S., Canada and Mexico, North American feeder cattle supplies will get tighter at least through 2016.
