Slaughter increased by 2.5 percent (adjusted for slaughter days), while average live weights increased by 1.4 percent. Preliminary weekly slaughter data suggest that slaughter and weights continued to increase year over year in December.

The US broiler layer flock as well as pullet placements intended for domestic hatchery supplies continued to trend higher year over year, implying a larger broiler breeder flock in the near and medium term.

In 2020, increases in slaughter will be supported by a larger breeder flock as well as by increased industry processing capacity as plants that came online in 2019 are expected to scale up to full capacity in 2020. Gains in aggregate live bird weights will continue to be supported by an increasing share of heavy-bird production (i.e., birds weighing more than 6.26 lbs).

The 2020 US production forecast was revised up to 45.4 billion pounds, almost 4 percent higher than 2019 forecast production. Abundant broiler supplies relative to demand put significant pressure on whole bird (national composite) wholesale prices in 2019, which averaged 88.6 cents per pound for the year—9.4 percent lower compared to 2018. With expectations for increased production in 2020, whole bird prices are expected to remain relatively low in 2020 at 86.5 cents per pound—3 percent lower than 2019. Boneless/skinless breast meat, which has typically been the most valuable part of the bird, was also relatively low, averaging 105.7 cents per pound in 2019, which is 3.6 percent lower year over year and 19 percent lower than the 5-year average (see chart).

Despite expectations for lower whole bird prices and breast meat prices, producer margins may find some relief from higher leg quarter and whole leg prices, which averaged 38.8 cents per pound (+12.7 percent year over year) and 58.8 cents per pound (+27.2 percent) in 2019, respectively. Leg quarter and whole leg prices are expected to remain firm in 2020 due to increasing global demand. Additionally, producer margins should benefit from redirecting chicken paws from low-value rendering to higher value exports to China. The increased production will likely impact broiler cold storage inventories as well.

The November cold storage report indicated a significant increase in broiler ending inventories, reaching 957 million pounds—the largest quantity on record. This increase was driven by large inventories of breast meat, leg quarters, other, and thigh meat. It was unlikely that cold storage facilities would liquidate by the end of the year, which was the basis for increasing the 2019 ending stocks forecast to 940 million pounds.

Similarly, in 2020, the expected increase in production as well as the higher forecast carry-in will likely cause stocks to build; reflecting this, the 2020 US ending stocks forecast was revised up to 945 million pounds.

The fourth-quarter US export forecast was increased to 1,875 million pounds on higher-than-expected November trade volumes. Broiler exports were estimated at 642 million pounds for November, a 3.3- percent increase year over year. Although there were a few sizeable year-over-year decreases to Cuba (-27.2 million pounds), Mexico (-8.1 million pounds) and Georgia (-8.1 million pounds), overall volumes were supported by increased shipments to several key as well as smaller markets.

Regarding China, customs officials added an additional 177 US poultry meat facilities on December 25 (for a total of 349) to the list of plants and cold storage facilities eligible to export poultry meat to China. Chinese customs officials are in the process of adding these facilities to their online permit system. Broiler meat shipments to China are expected to gradually ramp up during the first half of 2020.