Poultry industry snapshot
June 9, 2016
by Joel Crews
KANSAS CITY, Mo. – While the US poultry industry is still recovering from the avian influenza outbreak of late 2014 and 2015 in some markets, favorable feed prices, a stronger US dollar and growing demand for domestic and exported products is fueling investments in new plant projects and expansions. During this week’s 2016 Sosland Purchasing Seminar, Eric Scholer, vice president of Express Markets Inc., Fort Wayne, Indiana, told attendees how factors such as larger bird weights and the move toward antibiotic-free products is influencing the domestic markets while dark meat demand is driving recovery for US export partners. He also discussed how challenges such as the prevalence of woody breast meat are forcing the industry to find a solution to an elusive problem.
Scholer pointed out that like most livestock in the past several years, live weights continue to increase and chicken is no exception. Average bird weights are just over 6 lbs., but the big-bird segment is seeing averages weights of 9 to 10 lbs.
Scholer also mentioned the antibiotic-free (ABF) movement is helping temper the bigger-bird movement. Most plants’ ABF birds fall in the 5.5-lb. to 6-lb. range with a few topping out closer to 7 lbs. or less. The performance and the costs get pretty significant as weights approach the higher end of that range, he said.“
|Eric Scholer, vice president of Express Markets Inc.
As we have more and more companies announce they’re moving toward antibiotic free, you’ll have operations that will be moving toward that (lower) bird-rate range rather than 9- to 10-lb. chickens.”
As tray-pack demand has grown in the poultry segment, larger bird sizes have also been evident, Scholer said. In years past, it was common to tray pack parts totaling about 6.25 lbs., whereas today, that weight is 6.5 – 7.0 pounds. The shift is reflected in USDA’s weekly slaughter breakout report.
One of the poultry industry’s challenges discussed by Scholer is what is known as woody breast, which gained widespread attention after it was addressed in a Wall Street Journal report published this past March. Processors and producers are flummoxed by what causes the condition, and are challenged by what to do with the meat deemed to be ‘woody’. However, it has led to producers limiting the move to grow larger birds as they work to identify a solution.
In terms of ready-to-cook chicken production, Scholer said the industry grew by approximately 3.75 percent in 2015 with this year’s growth expected to be 2 percent. As growth rates flatten in 2017, Scholer said production should be about 1.2 percent, which is also a result of slaughter capacity topping out and limited housing and feed mill capacity. However, with several processing plants recently coming online or scheduled to begin operation in the near future, slaughter capacity could increase.
Chicken availability in 2016, given the additional production coming online and slow comeback of export markets post-AI, are expected to increase in the US by 2 lbs. per capita, Scholer said, and in the coming year, “our export growth looks to exceed our expansion and production.”
Exports continue to be a significant driver for the US poultry industry with about 45 percent of dark meat being produced typically being exported. A slight drop after last year’s avian influenza outbreak in the US saw that number drop to about 35 percent, but since then the recovery has been steadily moving back to the 45 percent mark. The export market for the US, which in years past relied almost solely on Russia, has evolved, with about 45 percent of chicken exports going to countries that import less than 1 percent of the US total.
“We are shipping small quantities to a lot of different locations,” Scholer said, which dampens the impact of disruptions and exposure, animal disease hiccups notwithstanding, like last year’s AI outbreak. Most of those disrupted markets have come back, he said, but competition for those export markets continues, especially with Brazil.