Competitive Commodity Insights

Commodity Insights

Competitive Commodity Information: Turkey Outlook

Turkey supplies steady to increased in the long-run

Despite dire warnings, longterm production on the rise, USDA reports

Just a short year ago, the turkey sector, along with the overall U.S. poultry industry, was faced with conditions nothing short of dire. Record-high feed grain prices, trade-agreement stalemates that threatened the ever-important export market, and a stalling U.S. economy had led some poultry companies to put the axe to production and sell off processing units. Speaking for the larger poultry complex, Michael Welch, CEO of Harrison Poultry testified before the Senate in summer 2011, "Broiler companies until recently have tried to weather the storm of very high, very volatile corn prices. But, now, companies can no longer withstand the storm."

"You make turkey out of corn," D.A. Davidson market analyst Tim Ramey told one financial media outlet. "[And] there's no doubt that will be expensive going forward." With this summer's drought-reduced corn supplies coupled with steady to increasing global corn demand put a further squeeze on feed supplies, turkey prices have risen. However, smart feed purchasing in advance by most of the major turkey producing companies along with favorable market price support in export markets have kept turkey companies afloat and supplies stable.

Turkey meat production in the United States for the fourth quarter of this year is forecast at 1.55 billion pounds, which once again would be almost a 4-percent increase from the same period a year earlier. At the end of September, stocks of whole turkeys were estimated at 305 million pounds, up 9 percent from a year earlier. Higher whole bird stocks have placed downward price pressure on their wholesale prices.

Click to enlarge. Long term U.S. turkey trends

Most of this fourth-quarter supply increase is expected to come from a higher number of turkeys slaughtered, with only small gains in average weights.

For the year ahead, production is forecast at 5.79 billion pounds, a decrease of 3 percent from the previous year. The decline in turkey production is expected to come from the combination of high feed prices, larger beginning stocks and lower year-over-year prices for whole birds in fourth-quarter 2012 and in the first half of 2013, USDA reports.

Overall turkey cold storage holdings at the end of 2012 are forecast at 250 million pounds, about 18 percent higher than the previous year. As with third-quarter 2012, almost all the increase is expected to come from larger holdings of whole turkeys, with little or no increase in stocks of turkey products. 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 $1.09 per pound in third-quarter 2012, only a little over one percent higher than in second-quarter 2012 and 2 percent higher than the previous year. This compares with prices in the first two quarters, which were 12 and 7 percent higher, respectively. Whole turkey prices are expected to average $1.05-$1.09 per pound in fourth-quarter 2012, down several cents from the $1.12 per pound average for fourth-quarter 2011.

The long-term trend toward higher U.S. per-capita turkey consumption year-round has helped stabilize demand and maintain production. According to the U.S. Turkey Federation, only 31 percent of turkey is consumed during the fourth quarter of the year, compared to about half 40 years ago. That increase in consumption during the other three quarters of the year has helped increase per-capita consumption from just over 8 pounds in 1970 to more than 16 pounds today.

Turkey, not just for the holidays anymore

Competitive Commodity Insights: How Did Pumpkins Fare the Drought?

Pumpkin supplies have grocers smilingDespite early reports the summer’s relentless drought had caused many pumpkin crops to be much smaller than normal and that harvest was slightly behind schedule, pumpkin supplies appear to faring the unusual weather reasonably well.

USDA reported in late September that U.S. pumpkin production areas were reporting good crop progress for this year’s Halloween season. With volume on track, average retail advertised prices for pumpkins in the early weeks of September had been running as much as 25 percent below the same period in 2011.

Meanwhile, Associated Press news reports said farmers around Peoria, where USDA says more than three-quarters of the country's pumpkin crop originates, were calling this crop one of the few successes to survive the devastation of the drought. "Pumpkins have been kind of a bright spot," one Morton, Ill., farmer told AP.

Some localized regional supplies outside Illinois, hit hard by the drought, appear to be lower than usual; however, supplies from border areas, particularly Minnesota and Arkansas, are filling any void left. Pumpkins are not as vulnerable to drought as other crops, because they develop a deep root that can reach water when other plants can’t. Many growing areas got rains at a key point in the plants’ growth cycle, but drought still slowed that growth. And because excessive heat can cause pumpkins to delay flowering and fruiting, that may spell a late harvest. Anecdotal reports also suggest large pumpkins will be in short supply, likely because of that shortened season.

Although the outlook is favorable, yield and quality still remain to be seen, and will depend on the weather. Excessive rains and a wet finish to fall could cause rotting and molding that reduce the final crop numbers.

Have an experience to share? Give us your feedback on your local pumpkin supplies and pricing.

Competitive Commodity Insights: Drought Impact Reaches Deep

Where has all the popcorn gone?Even as needed late summer rains moved into areas of the state, USDA’s National Agricultural Statistics Service Nebraska Field Office reported not even one-third of the state's corn acres were rated either good or excellent. For comparison, 76 percent of last year's Nebraska corn crop at harvest rated either good or excellent, and that figure rises to 79 percent in any average year.

Although the lion's share of concern about this crop typically goes to the staples of field corn and soybeans, it bears well for retailers to remember the weather affects virtually all crops in the state. Take for instance, the staple of the snack-food aisle, popcorn. All across the Midwest, including Nebraska, the nation's No. 1 producer of the snack by nearly a factor of half again compared to our nearest competitor, the wilting heat and lack of moisture has taken its toll on that small but important crop, as well.

"This is the worst season we've ever had," Indiana popcorn merchandiser Mark Shew told Reuters News. "In some places, they're going to be down to counting kernels at the bottom of the storage bins."

Mark McHargue, who grows 230 acres near Central City, told the news bureau that although irrigated acres of popcorn in Nebraska have fared OK, the losses on dryland popcorn acreage are almost complete.

Popcorn purveyors predict that as a result, popcorn buyers will have to dig hard to line up supplies this fall.


Nebraska is the nation's No. 1 popcorn grower


Retail prices have risen from about $20 per 50 pounds to more than $30 or higher, according to one industry consultant. Wholesale prices are on the rise, too. This year's drought aside, popcorn is being further pressed by a longer-term supply and demand squeeze. Although popcorn farmers often used some of their less-productive, marginal ground to plant some popcorn as a diversifier, the record high prices for yellow field corn and soybeans have lured them to put those popcorn acres into those crops. That shift has pressured supplies downward. Meanwhile, demand for popcorn has gradually risen, aided by export enhancement programs from USDA. Because the United States is the largest supplier of popcorn in the world, and 80 percent of the U.S. crop is currently consumed here, that increasing global demand will also take a larger bite of already tight supplies.

Competitive Commodity Insights: Focus on Grilling Items

Grilling outlook

As the Fourth of July Holiday marks the "hump day" for summer grilling season, we take a look ahead at the rest of this summer and fall's projections for the commodities that go onto shoppers' barbecues.

Beef. How high can beef go? Frankly, USDA appears to be unable to answer that pressing question. Even at current breakneck wholesale prices, USDA reports the projected costs cattle feeders face are so high that the average feeder is losing about $200 per head. If we can assume somebody is going to raise and feed the cattle that go into your beef, eventually cattle prices are going to have to rise in order to change that unsustainable market situation. The market is reflecting that reality: Notwithstanding prices for 50-percent lean beef that remain depressed by the publicity concerning Lean Finely Textured Beef, USDA Choice beef cutout values have again increased, approaching previous record levels of almost $200 per hundred pounds. And although processing beef prices also may have reached a temporary peak and could decline over the next quarter, the longer term outlook for all beef remains upward due to declining inventories and prospects for lower feed grain prices this fall.

Pork. This week's hog inventory report from USDA should confirm second-quarter 2012 commercial pork production is expected to be 3.3 percent ahead of the same period last year, at 5.5 billion pounds. That increase means for 2012 the U.S. pork sector is expected to slaughter almost 2 percent more hogs, at higher dressed weights than last year. Both of these factors contribute to a 2012 commercial pork production forecast of 23.4 billion pounds, almost 2.7 percent above production in 2011. That increased supply will pressure second-quarter average prices for live equivalent 51 percent to 52 percent lean hogs down almost 14 percent below the same time last year. However, the demand side will continue to be boosted by overseas markets. April U.S. pork exports in April at almost 7 percent higher than a year ago show exports, particularly to China, have stabilized at a much higher level than in the past.

Chicken. USDA's latest counts for total broiler meat production, for April, pegged it at 2.99 billion pounds, an increase of 0.7 percent from the previous year. Broiler meat production has been mixed in 2012, with higher production in February and April and lower production in January and March. Processors reported slaughtering 683 million broilers in April, a decrease of 0.5 percent from the previous year. Offsetting this decrease in the number of birds slaughtered was an increase in the average broiler liveweight at slaughter to 5.84 pounds, 1.4 percent higher than the previous year. The average meat yield per bird was 4.38 pounds, up 1.2 percent from a year earlier.  With these changes and a small adjustment to the first-quarter production, the estimate for 2012 was increased to 36.89 billion pounds, down slightly (0.8 percent) from 2011. The increases in broiler meat production in the second and third quarters are expected to come from a combination of a higher number of birds slaughtered than originally expected and higher average weights. At the end of April, broiler stocks were down in all the categories reported in the Cold Storage report. With lower production and stock levels in the second half of 2011 carrying over into 2012, wholesale prices for most broiler products rose. However, prices for many products peaked a week or two before Memorial Day and have declined since then. With the upward revisions in production and stocks, most broiler prices are expected to be under some downward price pressure in the coming months.

Lamb. Price declines seen throughout the early spring are expected to continue well into the summer months. The lower prices are due to both softer demand and an increase in the number of heavier slaughter animals. It is normal for lamb and mutton demand to exhibit a seasonal decline in late spring as the Easter and Passover demand boost disappates. This year, the consumption boost from these holidays was not as pronounced as in previous years, resulting in a backlog of market lambs in feedlots. The problem was compounded by the fact that fed lambs utilized food more efficiently during the relatively mild winter, causing them to gain weight at a faster than normal rate. In addition, higher hay prices in late 2011 resulted in some animals being placed on feed earlier than they normally would have been. This resulted in record heavy weights of slaughter lambs, which continue to persist in the industry. Despite the softer demand, lamb and mutton production is still relatively strong, in part due to the higher than normal average dressed weights of slaughter animals. Lamb meat held in cold storage in May was up 46 percent year-over-year. First-quarter 2012 commercial production was 39 million pounds, 8 percent above first-quarter 2011. Production declined slightly in April and May, however. Commercial lamb and mutton production in April was 12.9 million pounds, with similar production volumes estimated for May. Second-quarter commercial lamb and mutton production is forecast at 37 million pounds, below the 40 million pounds a year earlier. All those supply boosting factors will contribute to lamb prices falling about 18 percent below the same period a year earlier as soft demand pressures the market.



Competitive Commodity Insights: Late Spring Crop Updates

In the springtime, it's all about the rain

This time of year, farmers have settled in from the spring planting rush to watch the crops grow, while the commodity markets get nervous based on the weather. Here's what the U.S. Department of Agriculture predicts about the crop situation for some of your key commodities this spring.

Wheat. The 2012/13 outlook for U.S. wheat is for larger supplies and use, but lower prices. The season-average farm price for all wheat is projected to fall as much as $1.75 per bushel from the record $7.25 per bushel projected for 2011/12. USDA projects all wheat production to be up 12 percent from last year’s weather-reduced crop--the largest crop since 2008/09. Spring wheat production for 2012/13 is expected to rebound with a recovery in durum area and higher projected yields for other spring wheat, which are expected to offset the decline in other spring area wheat. U.S. wheat supplies for 2012/13 are projected at 3.133 billion bushels, up 5 percent from 2011/12.

  Corn and other feed crops. Thanks to cooperative spring weather, corn farmers were way ahead of schedule, with nearly three-quarters of the crop planted by USDA's May 6 behchmark, compared to only 47 percent and 32 percent by that deadline, respectively, in 2007-11 and 2011/12. That early planting boosts the projected yield for 2012/13 to 166 bushels per acre, compared with last year’s weather-reduced yield of 147.2. Rapid planting and emergence is also likely to affect supplies during the last quarter of the 2011/12 marketing year, resulting in reduced prospects for the traditional June-August quarter feed and residual disappearance. Total corn production for 2012/13 is projected at a record high 14.79 billion bushels, 20 percent over last year’s crop. Record foreign coarse grain production and the huge U.S. corn crop boost 2012/13 global coarse grain supplies to record levels; however, with foreign coarse grain use increasing faster than production and less competition from low-priced wheat, prospects for U.S. corn and sorghum exports are also raised. Total U.S. feed grain use is expected to increase by 30.9 million tons to 365 million tons in 2012/13 due to higher feed and residual use and exports. Increasing U.S. poultry and hog inventories and lower prices are expected to boost demand for feed.

Rice outlookRice. USDA projects that a big decline in year-to-year carry-over stocks combined with a slightly smaller crop will result in rice supplies that are the lowest in more than a decade. Total domestic and residual use of all rice in 2012/13 is projected to remain unchanged from a year earlier, while U.S. ending stocks of all rice in 2012/13 are projected to fall almost 26 percent from a year earlier and be the smallest since 2003/04. Global rice production for 2012/13 is forecast at a record 466.4 million tons, an increase of less than 1 percent from a year earlier. As a result, prices for most grades of Thailand’s parboiled and white rice have risen over the past month, quotes from Vietnam have declined slightly, and U.S. long-grain milled-rice prices have increased from a month earlier, largely a response to expectations of a much smaller crop in 2012/13. Prices for California rice for the domestic and export markets have remained unchanged.

Oil crops outlookSoybeans and other oilseeds. Because season-ending soybean stocks are projected at 145 million bushels—near an all-time low as a percentage of total use--even a U.S. soybean crop for 2012 projected to be up 5 percent to 3.205 billion bushels isn't easing supply worries. Even though USDA projects global soybean production in 2012/13 to increase 15 percent to 271.4 million metric tons, the agency still sees chances for another record high to be set in 2012/13 for the U.S. soybean farm price, at $12 to $14 per bushel. Aided by historically warm weather for March and April, soybean planting this spring got off to one of the fastest starts ever, with more than double the usual rate sown by May 6. Markets will be sensitive this summer to any weather-related threats to U.S. soybean yields. Even assuming normal yields, strong demand may very well push soybean prices in 2012/13 above this year’s expected record at $12.35 per bushel.

Meanwhile, U.S. planting intentions for cotton this year are down 11 percent to 13.2 million acres as farmers are favoring production of corn and soybeans. Despite lower sown acreage for cotton, harvested area may actually increase in 2012 by 11 percent. Last year, record-setting heat and drought in the Southwest led to a wave of cotton abandonment. Of the cotton acreage sown in Texas last year, nearly 60 percent was never harvested. The percentage of cotton harvested in 2012 should be considerably better and yields will likely recover, also. That combination may raise U.S. cottonseed production for 2012/13 to 6 million short tons from 5.4 million in 2011/12. A much improved Texas crop this year may account for nearly all of the forecast increase in U.S. cottonseed production. A higher cottonseed supply could help to boost 2012/13 crushing to 2.5 million tons from an estimated 2.4 million this year.

 Animal products sectorMeats, eggs and dairy. USDA's projections in the animal-proteins sector include:
- Beef/Cattle: U.S. beef exports for 2012 are forecast at 2.6 billion pounds, or 6 percent lower year-over-year. Beef imports for 2012 are forecast 19 percent higher, year-over-year, at 2.4 billion pounds. U.S. cattle imports through the first quarter are fractionally higher compared with the same period a year ago, as higher Mexican cattle imports are offsetting lower imports from Canada.

- Pork/Hogs: In 2013 small increases in farrowings and continued strong sow productivity gains, together with higher average dressed weights due to lower feed costs are expected to translate into a moderate increase in pork production. U.S. commercial pork production is forecast at 23.8 billion pounds, an increase of 2.3 percent over 2012. U.S. pork exports are also expected to grow moderately next year. 2013 pork exports are forecast at 5.4 billion pounds, an increase of close to 1.8 percent over this year’s level. Production and export forecasts point to 22.7 percent of production to be exported next year, compared with 22.8 percent in 2012.

- Poultry: Broiler production is expected to increase 2.5 percent in 2013, after a forecast decrease of 1.6 percent in 2012. With expected stronger economic conditions, a forecast of decline in feed costs, and relatively strong prices for competitive meats, broiler integrators are expected to have an incentive to expand production. Turkey production in 2013 is also expected to be higher, up 1 percent. This would be the third consecutive year of production increases after declines in 2009 and 2010. Egg production is expected to be mixed in 2013, with table egg production declining slightly and hatching egg production higher.

- Dairy: Current year milk and dairy product prices continue a downward glide as milk production continues to expand despite lower producer returns in the face of high feed prices. Next year’s milk production increase is expected to be slight as the cow herd contracts and demand becomes somewhat stronger, lifting prices.


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.

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.