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IPE 2012: Things Can Only Get Better for the US Poultry Meat Industry

25 January 2012, at 11:53pm

ANALYSIS - After a terrible year last year – the worst for more than a quarter of a century – Mike Donohue believes the poultry industry faces improving prospects over the next 12 months, reports senior editor, Jackie Linden, from IPE 2012.

Mr Donohue, Vice President at Agri Stats, offered his overview of the current state of the poultry meat industry in the US during the Hatchery-Breeder Clinic session organised yesterday in conjunction with the International Poultry Expo in Atlanta, US.

Many broiler and turkey companies have struggled over last year to stay in business, he asserted, and with the business situation so volatile, he said it is impossible to predict the profitability of the industry, even over the next six to eight months.

The US industry has experienced the longest period of losses for many years, said Mr Donohue, but things are showing signs of getting better. He mentioned particularly a more stable and diversified export market for leg quarters after a period of wide fluctuations in volumes sent to Russia. Wing prices are holding up and prices of boneless breast meat were higher in December than for many years. Because the industry has cut back volumes, Mr Donohue expects prices to be maintained during 2012 and indeed, for the next three to four years.

Volatility in feed costs is likely to be ongoing, he said. The 'new normal' price for maize (corn) is likely to be $6 per bushel, well above the $4-average of the past and it could well go higher if there are problems with this year's global harvest.

Live production results are now the vital key to profitability, according to Mr Donohue.

With feed costs rising last summer to account for 69 per cent of total broiler production costs, "the economic consequences of disease, mortality and condemnations is now twice as much as four to five years ago," said Mr Donohue.

He went on to present evidence of the industry's improved production performance, such as hatchability now averaging 84 per cent or more, reductions in mortality and condemnations and what he called "phenomenal improvements" in terms of increasing growth rates and feed efficiencies.

In summing up, Mr Donohue forecast 2012 and the first half of 2013 as offering good prospects for the poultry meat industry following a very challenging 2011 but he added the warning that the industry is vulnerable to further increases in costs, particularly of feed.