U.S. Poultry Industry Set to Rebound 2010

February 5, 2010, Atlanta – The coming year will be a profitable one for U.S. broiler producers, and the U.S. economy will continue its recovery from recession this year, according to a panel of economists who spoke at the 2010 Poultry Market Intelligence Forum held during the International Poultry Expo.

February 5, 2010, Atlanta – The
coming year will be a profitable one for U.S. broiler producers, and
the U.S. economy will continue its recovery from recession this year,
according to a panel of economists who spoke at the 2010 Poultry Market
Intelligence Forum held during the International Poultry Expo.

The Forum is a joint effort of U.S. Poultry & Egg Association and the National Poultry & Food Distributors Association.
 
Dr. Donald Ratajczak, a prominent economic consultant, said that restraints on the availability of financing have had a major impact on economic activity. As the restraints have eased, economic activity has picked up.
 
One example cited by Ratajczak was the impact that falling used car values had on the availability of new car leases, which in turn hurt new car sales. He said that the “Cash for Clunkers Program” actually has helped correct this problem. Cash for Clunkers put new cars on the road without adding used cars to the market. This gave a boost to used car prices, which in turn encouraged lease availability, and boosted new car leases late in 2009.
 
Restraints on credit forced many companies to reduce inventories of finished goods to improve their cash positions, according to Ratajczak. As inventories fell towards the end of 2009, companies began to increase production. Ratajczak said that this inventory effect helped lead to a 5.7% increase in GDP in the fourth quarter of 2009.
 
However, U.S. consumers are still not enthusiastic about the economy. They have suffered a real loss of wealth because of declines in the stock market and home prices. Consumers are increasing savings levels to help offset their loss in wealth, and this will dampen growth in consumer spending. He said that he expects consumer spending in the U.S. to increase by 2-2.5% in 2010.
 
Ratajczak added that he thinks that stocks are still somewhat undervalued based on the levels that he expects corporate earnings will rebound to this year. He predicted that the Dow Jones Industrial average will exceed 12,000 at the end of this year.
 
Better poultry meat prices in 2010
 
Dr. Paul Aho, Poultry Perspective, said that he expects U.S. bulk leg quarter prices will be lower in the first half of 2010 than they were in the same period in 2009. In the second half of the year, he expects leg quarter prices will exceed year before levels and will end the year around $0.10 per pound higher than at the end of 2009. He said that trade difficulties with Russia will create a drag on leg quarters early in 2009, but he expects some resolution to the dispute and that Russia will buy U.S. leg quarters in 2010.
 
Boneless skinless breast meat prices should be higher in the U.S. throughout 2010 than in 2009, according to Aho.
 
Outstanding live performance continues for industry
 
Mike Donohue, Agri Stats, said that because of higher grain and energy prices, live production performance is more important than it has been in 20 years. Fortunately, 2009 was an outstanding year for the U.S. industry in terms of live performance.
 
Donohue credited a number of factors for the long term trend of improvement, including improvements in bird genetics and in on-farm equipment and housing. Average livability for the industry was over 96% in 2009, up 1.5% from 20 years ago. Improved flock health has also resulted in a roughly two thirds reduction in the rate of field condemnations at the processing plant from the levels of 20 years ago. Donohue also explained that some of 2009’s outstanding live broiler performance can be attributed to increased downtime between broiler flocks which was a result of production cutbacks.
 
The range between the best and poorest performing companies in terms of feed cost per live pound of broiler has increased from around $0.05 per pound in 2005 to $0.11 per pound in 2009. Donohue said that this increased spread results from the costs of grain purchasing positions, logistics of moving grain and differences in bird performance.
 
Subsidized corn-based ethanol production in the U.S. continues to cost the U.S. broiler, turkey and egg industries billions of dollars, according to Donohue. Over the last 2.5 years he estimated that based on Agri Stats data, U.S. poultry producers have spent $18.5 billion more for corn because of the ethanol mandates, subsidies and tariffs.
 
Commenting on projected profitability of the U.S. poultry industry, Donohue said, “2010 should be a good year for the industry.”