Oklahoma State economics professor Jason Lusk regularly surveys shoppers to maintain an ongoing sense of preferences and sentiments on the safety, quality, and price of food, with particular focus on meat demand. His monthly on-line survey with a sample size of at least 1,000 individuals, weighted to match the US population in age, gender, education and region gives an ongoing glimpse into some sentiments and plans regarding meat and meal alternative pricing.
U.S. Bureau of Labor Statistics data showed national average prices for fresh whole chickens hit their all-time high in the final quarter of last year. In the last ten years, BLS says, the price has risen 51 percent, from $1.02 in October 2003 to October 2013's $1.54 per pound. At the same time, USDA was cautioning that projections for retail poultry prices were continuing to point upward, at an estimated 3.5 percent to 4.5 percent increase.
"Poultry demand continues to be very strong," a USDA economist said in an agency broadcast earlier this fall. "Even though supplies are healthy and there are no real issues with supply, the demand for poultry is very strong and the whole industry is still dealing with relatively high feed prices."
Can supply going forward keep pace with that demand?
USDA thinks so. The agency reported in mid-January that generally higher production over the last several months and higher overall cold storage levels had started to pressure prices for many broiler products downward. Most of the decline has come over the last several months, as year-over-year average prices for 2013 were lower for many broiler products. Wholesale prices for whole broilers averaged 95 cents per pound in December, 3 percent lower than in December 2012, although the annual average for 2013 was $1 per pound, a 15-percent gain from the 2012 average of 87 cents per pound. The price for boneless/skinless breasts followed the same pattern, with the December average 3 percent below the previous year, but with the annual average 15 percent higher. This pattern of price changes was also similar for boneless/skinless thighs.
Many of the price changes at the wholesale level are a reflection of the stocks changes over the last several months. With cold storage holdings at the end of November up fully 64 percent from the same period in 2012, prices of leg quarters fell, with the December 2013 average at just 42 cents per pound, a decline of 17 percent from the previous year. Prices for wings have also fallen sharply compared with the previous year. Average prices in December were $1.20 per pound, down 37 percent from 2012. Much of this drop can be attributed to increases in cold storage holdings, which at the end of November were 36 percent higher compared with the same period in 2012. In past years, wholesale wing prices have gradually strengthened in the fall and peaked in late January or early February. With the much higher level of cold storage holdings, wholesale wing prices are not as likely to reach their levels of past years.
With higher stock levels to start the year and higher production expected, broiler prices are expected to be under some downward pressure. The extent of the pressure will depend on the impact general domestic economic conditions and higher beef prices have on the demand for broiler products.
Nebraska is now the most recent state to be hit by a new pig virus known as Porcine Epidemic Diarrhea. That now brings the total number of states affected to 20, USDA announced this month. The virus, which kills baby pigs in large numbers on affected farms, had never been reported in North America until it was discovered in the United States in May, fueling widespread speculation it will cause a deep decline in pork supplies next spring and summer, when the losses in young pigs will be first felt. For instance:
But are the predictions true?
The presence of the virus, known as Porcine Epidemic Diarrhea, or PED, in at least five of the nation's top pork-producing states does have the pork industry nervous over its potential impact. The U.S. Centers for Disease Control reports that after it was first found in China three years, the virus spread rapidly through southern China, eventually killing more than a million young pigs there. The virus now being found in U.S. hog farms is nearly identical genetically to the Chinese one, and it is displaying the same tendency to be highly deadly to very young piglets. It often kills from half to all the baby pigs on an infected farm.
The virus is not believed to pose any infection risk to other animals or to humans, so pork from PED-infected pigs should be safe to eat. However, the potential for large-scale animal losses does beg the question: Will it lead to widespread pork shortages?
Not likely, for several reasons:
"Butterball's Turkey Shortage Might Ruin Your Thanksgiving," the Huffington Post breathlessly warned online readers a couple of weeks ago. The story, apparently spurred by a press release from a small New England grocery chain, made the Internet rounds, claiming that Butterball, with a 20 percent share of the U.S. turkey market, had halved its nationwide shipments of fresh turkeys bigger than 16 pounds because of production issues that had delayed their growth.
The National Turkey Federation cautioned against panic, noting that all but 20 percent of U.S. turkey sales are frozen, not fresh. Even Butterball said fresh turkey accounts for only about 15 percent of its stock. So what's the real turkey supply situation?
USDA reports turkey meat production in third-quarter 2013 was down 2.7 percent from a year earlier, at 1.44 billion pounds. The decrease in turkey production was due to a lower number of turkeys slaughtered--down 5 percent from a year ago--as average liveweights at slaughter were actually higher. This is the fourth quarter in a row where the number of birds slaughtered has been lower than in the same quarter a year earlier; however, the drop in the number of birds slaughtered was partially offset by gains in the average liveweight at slaughter to 29.9 pounds, 2.5 percent higher than a year earlier.
Turkey meat production in fourth-quarter 2013 is forecast at 1.48 billion pounds, 4 percent lower than a year earlier. Again most of this decrease is expected to come from a smaller number of turkeys slaughtered, with only a small gain in average liveweight at slaughter. Turkey meat production in 2014 is forecast to be 6 billion pounds, which would be an increase of 1.7 percent from the previous year. Production is expected to begin to expand in the second half of the year as turkey processors determine that falling feed costs more than offset lower prices and strong competition from the broiler industry in both the domestic and export markets.
Yet even with lower turkey meat production over the second and third quarters of this year, overall turkey stocks have remained above the previous year throughout 2013. Cold storage holdings of turkey products at the end of September were 542 million pounds, 4 percent higher than a year earlier. Stocks of turkey products totaled 216 million pounds at the end of the third quarter, almost identical to the previous year. The fact that stocks of turkey products are about even with the previous year is due partly to the lower overall turkey production and partly to continued relatively strong turkey product exports. For 2014, the quarterly ending stocks forecasts are expected to be slightly higher throughout the year. With higher stocks of whole birds, there has been downward pressure on whole turkey prices. Prices for whole frozen hen turkeys at the wholesale level averaged $1 per pound in third-quarter 2013, down from $1.08 per pound in third-quarter 2012. Whole frozen hen prices are expected to average $1.01-$1.05 per pound in fourth-quarter 2013, down about 3 cents from the $1.06 per pound average in fourth-quarter 2012. The quarterly price forecasts for frozen whole hens in 2014 are expected to be very-close-to-slightly-lower than the levels seen in 2013.
The latest update from USDA on milk production, from August, showed dairy production was continuing to stay above year-ago levels, at 2.6 percent for the country as a whole. That's the fifth month in a row supply continues to increase. Yet even with the increase, other factors may be contributing to continued high or steady prices through October, analysts say. Although total dairy stocks are increasing, with butter stocks reaching a July 31st high fully 26.2 percent above last year's, they have fallen just over 8 percent during the past two months, coming into the strong selling season marked by Thanksgiving through Christmas. Its current price of $1.44 per pound is down 0.9 percent, but it was as low as $1.36 on August 20. Butter could reach $1.55 to $1.60 per pound.
Meanwhile, American cheese stocks as of July 31 were 5 percent more than last year's, although they likewise have shown the same pattern of dropping sharply in mid-August, only to recover in the last two months. Both cheddar barrel and block prices dropped in August futures trading, and some analysts have predicted rising prices into this month. The Chicago Mercantile Exchange block cheese price rose by 1.7 percent in the last month, ending at $1.81 per pound.
Both nonfat dry milk stocks and dry whey stocks are higher than a year ago, at 60.9 percent and 38.6 percent, respectively. Continuing demand strength driven by strong exports, expected to finish the year at a record high, will keep butter, cheese, nonfat dry milk and whey protein prices from falling through the end of the year. The latest export data, for July, show exports compared to a year ago were:
As is almost always the case for U.S. dairy production, the cost of feed will be an important factor for dairy prices beyond the holiday season. Anticipating lower feed prices, analysts believe large western dairies will respond by increasing their milk production, particularly in the face of demand assurances from the export market. If USDA’s crop projections for corn and soybeans prove true, feed staple prices should fall far below last year's, although they may be tempered by continuing high prices for hay, another necessary feed ingredient. However, because of the sensitivity milk production typically shows to small changes in cost expectations, a lot of uncertainty still remains as to future milk prices.