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Sunday November 19, 2017

Avian influenza threatening poultry prices?

A highly contagious strain of avian influenza found so far in at least 60 commercial poultry flocks, according to USDA reports, has some market watchers spooked. Most of the affected flocks are turkey operations in the midwest, and the state of Minnesota, the nation’s top turkey producer, has suffered worst, losing an estimated 2.6 million birds, and prompting the state's governor to declare a state of emergency. At risk is the approximately $4.8 billion value of some 200 million turkeys this country grows annually. But with detection of the virus in wild birds along the Mississippi and Pacific Flyways indicating the virus is active in migratory bird populations, the deeper fear is the virus could approach the chicken-producing centers of the eastern U.S.

Several European and Asian have placed some restrictions on imports of U.S. poultry as a result of the outbreak. As of its mid-April report, USDA was reporting 2015 turkey exports would fall 10.5 percent, to 720 million pounds, due to trade restrictions in China and Korea, the strength of the dollar against most currencies, and restrictions on U.S. exports due to the outbreaks. U.S. turkey meat production in first quarter 2015 is now estimated at 1.4 billion pounds, 25 million pounds less than the previous estimate but 7 percent higher than a year earlier. Turkey cold storage holdings at the end of February were 323 million pounds, an increase of 4 percent from a year earlier.

Meanwhile, although broiler meat production in January was 5 percent higher than the previous year, production in February was down 1 percent to 3 billion pounds; however, the estimate for first-quarter 2015 remained at 9.7 billion pounds, an increase of 5 percent from a year earlier. Current data point toward a strong increase in broiler meat production in March based on one additional slaughter day, leading to a higher number of birds slaughtered, in addition to continued increases in average liveweights. In February the number of birds slaughtered fell by 2 percent, but that decline was partially offset by a 1-percent increase in average liveweights at slaughter. This pattern of moderate growth in the number of birds slaughtered and higher liveweights is expected to continue throughout most of 2015. The increases are expected to push forecast broiler meat production in 2015 to 40 billion pounds, 4 percent higher than in 2014.

Although this outbreak of avian influenza, the worst in years, does pose significant risk to the industry and can be devastating to individual flocks, it's prudent to remember the world's strongest surveillance program for the disease. Federal and state animal health agencies along with industry has responded to try to contain and control the outbreak through several measures:

* Restricting movement of poultry and poultry-moving equipment into and out of specific quarantine areas

* Euthanizing affected flocks to prevent spread

* Testing wild and domestic birds in a broad area around the quarantine area

* Disinfecting affected flock locations to kill remaining virus

* Retesting to confirm affected farms remain virus-free. USDA also is working with its partners to actively look and test for the disease in commercial poultry operations, live bird markets and in migratory wild bird populations.

Farmer Goes to Market will keep you updated on important developments. Use the comment section to leave us your questions.

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Where will beef prices head now?

Encouraged by the return of (some, at least) winter precipitation, America's drought-beaten beef producers now show at least intentions of expanding the supply of cattle. Denver-based market-analytics firm CattleFax predicts the U.S. market for live cattle ready for slaughter hit its top cyclical price in 2014 and in all likelihood is now on its way down the back side of the traditional high/low price cycle.

However, that road back to wholesale price relief for grocers is a long and bumpy one, and will not come soon.

Rain makes grass, and grass makes beef, the old saying goes, meaning cattle ranchers devastated by years of drought are now making plans to start adding more breeding animals. Those obvious intentions, combined with a milder winter that should help farmers achieve those plans, coupled with a strengthening dollar and labor slowdown at West Coast shipping ports that could both tamper beef exports are all working together to push down the cost of live cattle on expectations of rising future supply.

But how quickly that translates to lower wholesale and retail prices is not black-and-white. The undertone in the wholesale beef market currently remains "soft," in USDA's words. But don't confuse that softness with poor demand, the agency's analyst cautions. Historically, total meat consumption tends to languish during the winter quarter, followed by burst of increased consumption as grilling season arrives. So for the first quarter of 2015, at least, buyers at the wholesale level remain reluctant to significantly increase beef purchases.

Retail beef prices rose to record highs in January, with January 2015 Choice retail beef at $6.33 per pound—up almost a dollar from this time last year—and all-fresh retail beef at $6 per pound, up over a dollar from January 2014. Still, at least for the near-term, packers continue to operate in the red. While wholesale beef cutout values did rally noticeably in late February as a result of reduced steer and heifer slaughter, those prices have not risen enough for packers to maintain steady profits, USDA says, although certain components like 90 percent lean beef remain at historical record levels.

USDA predicts beef prices will increase 4.5 percent to 5.5 percent this year--less than half last year's 11 percent to 12 percent increase. Overall retail meat, poultry and fish prices are expected to increase 3 percent to 4 percent.

On the way back to replacing the approximately 3 million breeding cows U.S. ranchers sold off between 2004 and 2010, supply will test the market's patience. All indications say we will have a larger crop of new calves born in the spring months, but that doesn't correlate to a bigger supply of market-ready cattle until 2016.

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Are gold-plated meat prices discouraging consumers yet?

Despite retail meat category prices in record territory, shoppers appear willing to continue to pay those higher prices, according to the latest update of a willingness-to-pay index from Oklahoma State University.


USDA reported that during the final two months of 2014, egg prices in most markets experienced a brief but sharp peak in prices. Wholesale prices for Grade A large eggs in the New York market averaging $1.28 per dozen the final week of October spiked more than 70 percent by the first week of December, rising to $2.19 per dozen.

Turkey pricesTurkey. U.S. turkey farmers produced just 0.2 percent less meat in August than they did in the same period last year, at 484 million pounds. Because that estimate actually came in higher than USDA expected, the agency revised its estimate for production in the third quarter 2014 to 2.1 percent higher than last year's. This anticipated increase comes after turkey meat production has been lower on a year-over-year basis for the last five consecutive quarters. Looking into next year, USDA expects that year-over-year production to increase to 3.4 percent higher than for this year. Lower feed costs and generally strong prices for whole birds and parts appears to be spurring turkey producers to increase production.

Still, even with that increased production, supplies remain limited. Cold storage holdings of turkey products at the end of August were down 15 percent lower compared to 2013, pattern that held true for the first eight months of this year. The lower stocks over the last several months were due primarily to smaller holdings of whole birds, specifically of whole toms--holdings of whole birds were 10 percent lower than a year earlier, but the decline came entirely from smaller stocks of whole toms. Stocks of whole hens at the end of August, in contrast, were 14 percent higher than a year earlier. Those lower stocks have pressured prices upward not only for whole birds but also for most parts, USDA reports. The average national price for frozen 8- to 16-pound whole hens was $1.10 per pound in third-quarter 2014, over 10 cents more per pound than a year earlier. The wholesale price in fourth-quarter 2014 is forecast at $1.12 to $1.16 per pound, about 9 cents per pound higher than the previous year. With falling cold storage holdings, prices for most turkey parts have been higher than those in the previous year. In August, prices for boneless/skinless turkey breasts were over 100 percent higher than a year earlier and averaged over $4.00 per pound. Prices of frozen tom drumsticks were also much higher, averaging just under $1 per pound, 34 percent above a year earlier. Prices will continue to get upward price pressure until rising stock levels, which are expected in 2015 from higher production, start to reverse this trend.

Lamb pricesLamb. Lamb and mutton production for the third quarter of this year is expected to by down 12 percent from the mid-year and down 4 percent compared to last year. Although production typically fall during the summer months because farmers have fewer market lambs to sell, USDA also believes the decline reflects recognition by farmers that weaker-than-expected consumer demand for lamb does not bode well for their bottom line ahead, and they are therefore reducing production. The amount of lamb and mutton being held in cold storage is the highest its been since the middle of WW II, USDA says. Cold storage right now represents nearly 2.5 times the entire production of domestic lamb and mutton for the month of July. Those excess stocks suggest consumers are slowing down in their lamb consumption. But despite the relative weakness in lamb and mutton demand, imports continue to show strength: Second quarter 2014 lamb and mutton imports were up 11 percent from the same period last year. Third-quarter imports are forecast at 37 million pounds, slightly above third-quarter levels in 2013.

Ham and pork pricesHams. USDA's September report regarding the pig inventory on U.S. farms showed the supply chain is feeling the effects of an epidemic disease that has moved through the major hog-producing regions which kills young pigs. The Sept. 1 inventory of market hogs was 2.7 percent lower than a year ago, reflecting losses to Porcine Epidemic Diarrhea that occurred in the spring and summer months. At the same time, the report indicated nascent signs of recovery and expansion. Fourth-quarter production is expected to be year-over-year lower, deriving as it does from lower pig crops. But as has been the story for most of 2014, higher average weights of the hogs farmers are bringing to market will help to offset lower fourth-quarter slaughter numbers. Pork production is expected to be about 6 billion pounds, almost 4 percent below a year earlier.

Meanwhile, pig farmers appear, like turkey producers, to be reacting to expected lower feed prices and higher hog prices by planning to expand supply. The Sept. 1 inventory of breeding animals was almost 2 percent higher than a year ago, the sharpest increase in the herd since December 2007. Hog prices that, although down compared to early 2014 are still 3 percent higher than the average for 2013 are incentivizing farmers to expand the number they breed by 4 percent for the fall and winter quarters. Meanwhile, USDA predicts pork demand will remain strong and continue to absorb those prices, as shoppers increase pork consumption to replace exceptionally high-priced beef products.


Supported by the Nebraska Farm Bureau

The farm and ranch families represented by Nebraska Farm Bureau are proud sponsors of the Farmer Goes to Market program. We take great pride in supporting Nebraska's agricultural foundation. A key part of that effort is to make sure we produce safe and affordable food. This newsletter is an important part of our effort to connect the two most important parts of the food chain -- the farmer and the grocer -- with the goal of increasing consumer awareness and information about how their food is raised in Nebraska.

In patnership with the Nebraska Grocery Industry Association

The Nebraska Grocery Industry Association was formed in 1903 by a group of Omaha grocery store owners, wholesalers and vendors to allow them to promote independent food merchants and members of the food industry, and to promote education and cooperation among its membership. NGIA continues to represent grocery store owners and operators, along with wholesalers and vendors located throughout Nebraska, by promoting their success through proactive government relations, innovative solutions and quality services. NGIA offers efficient and economical programs. NGIA also lobbies on both a state and national level, ensuring that the voice of the food industry in Nebraska is heard by our representatives.

Supported by the Nebraska Corn Board

The Nebraska Corn Board, on behalf of 23,000 corn farmers in Nebraska, invests in market development, research, promotion and education of corn and value-added products. The board aims to work closely with the farmer-to-consumer food chain, to educate everyone about the role corn has in our everyday healthy lives. The Nebraska Corn Board is proud to sponsor the Farmer Goes to Market program to help bring its mission of expanding demand and value of Nebraska corn to the consumer, through the strongest touch point in that chain: the Nebraska retail grocer.

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