Source:  MEATINGPLACE.COM, 5/23/11

Broiler-type eggs set in incubators saw their biggest drop from year-ago levels in more than a year in the latest week — an encouraging sign for a poultry industry burdened with oversupply.

If egg sets continue to slow, it could translate into lower production levels in the second half of the year, analysts said.

Egg sets rose sharply last year and continued to climb early this year before recently moderating, so declines now may only bring the industry in line with 2010 levels for the full year, said Paul Aho, economist at international consultant Poultry Perspective.

“It’s good news, but it’s not completely good news because there was a jump last year,” Aho told Meatingplace.

He predicted lower poultry production in the second half, with egg sets for the full year flat with 2010 levels on average. “Better times are coming, but this is not going to be a good year,” Aho said.

Egg sets are down in recent weeks at a time when producers typically boost production ahead of the summer grilling season, analysts said.

“Broiler producers resisted for sometime the signals coming from the market, intent on preserving market share and hoping to be the last man standing in an increasingly expensive game of 'who blinks first.’ The latest Broiler Hatchery report offered some evidence that cutbacks are coming,” analysts wrote in the CME Daily Livestock Report.

USDA’s broiler hatchery report covers broiler growers in 19 states who account for 97 percent of overall production. For the week ending May 14, broiler-type eggs set in incubators in these 19 states were estimated at 207.3 million, down 1.56 percent from a year ago and down 2.6 percent from the five-year average.

The weight of the birds coming to market could offset some of the benefit from lower egg sets.

Heavier birds boost supply

Total broiler slaughter is estimated at 2.873 billion head so far this year, 0.3 percent below the same period a year ago, the CME analysts said. But total broiler meat production, on a ready-to-cook basis, is up 2.2 percent from a year ago at 11.926 billion pounds.

“The industry continues to bring heavier birds to market,” they wrote. “Many of these birds are bred to produce copious amounts of breast meat and, as a result, breast meat supplies have continued to climb even though, at first look, we are not slaughtering more birds than we did a year ago.”

Skyrocketing corn costs, weak poultry prices heading into summer when prices typically rise, and growing beef supplies are worrisome for the poultry industry, Aho said, adding that some producers’ corn hedges are rolling off in August.

He believes producers are anticipating a better economy will improve demand for poultry in 2012 and 2013.
Stephens Inc. analyst Farha Aslam recently reduced her forecast for Sanderson Farms’ fiscal 2011 earnings to a loss of $1.41 a share from a loss of $0.17 a share to reflect the weaker price outlook for chicken due to sluggish demand and slower supply cuts.
 

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