story by Kim Souza
ksouza@thecitywire.com
From chicken processors to pork packers the fallout of the recent Avian Influenza outbreak is a concern and worth examining, according to Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist.
The U.S. Department of Agriculture’s APHIS (Animal and Plant Health Inspection Service) reports that the toll is nearly 34 million birds depopulated since the outbreak earlier this year. The majority of these are laying hens, followed by turkeys, with relatively few broilers, Peel noted. As a result, the biggest and most immediate impact for consumers is in egg markets, especially in the north central part of the country. The reduced supply of table eggs as well as breaking eggs used in food service will impact consumers directly and indirectly, Peel said.
Tyson Foods CEO Donnie Smith recently told media during the company’s earnings call that every time another case of bird flu is detected the clock is restarted with regards to export resumption. He said with 40 or more countries banning all poultry exports there is a risk of dark meat saturation in the U.S. market.
He said the risks to Tyson Foods are small given the company’s buy-versus-grow plan that allows it buy the pieces it needs to fill customer orders which is primarily breast and wings. This ensures there is not leg-quarters stacking up in the freezer while exports are shut off.
Pure play commodity chicken processors could have extra leg-quarters piling up unless they are able to market them in the U.S.
Peel agreed with Smith that the impact on poultry meat supply is minimal and likely to remain so. He said the depopulation total of 33.8 million birds is 0.38% of the 2014 poultry slaughter of 8.9 billion birds. While the turkey segment was hit harder by avian influenza, Peel said the depopulation to date represents about 3% of the U.S. turkey slaughter planned for this year.
“Both broiler and turkey production are still expected to surpass year ago totals unless the outbreak expands significantly,” Peel said.
He said domestic consumption is more likely to be affected from the direct loss of birds in the poultry segment. Peel also cites the export bans as the biggest risk to the meat markets overall. In 2014, 8.2 billion pounds of poultry were exported from the U.S., which is 18.2% of the 45 billion pounds of total poultry production. He said broiler and turkey exports, already struggling in 2015, are forecast to decrease even more in 2015 as result of the outbreak.
“Broiler exports are expected to be down roughly 9%, though the situation is very dynamic and the impact could get larger or smaller depending on what happens in the coming weeks,” Peel said.
When the chicken is not sent abroad that means product is stacking up in the U.S and that can result in downward price pressure amid retail promotions to move the product. Wholesale Georgia Dock pricing of leg-quarters are already trading lower at 49 cents a pound. A year ago they were bringing 55 cents a pound.
Peel expects domestic broiler consumption to rise 6.5% this year. He said pork production also is expected to expand this year as much as 6.7% over last year.
The laws of supply and demand could mean the added meat on the market will come a little cheaper for consumers given that pork often competes with chicken, particularly in the summer grilling season.
Beef production is expected to decline between 1% to 2% from 2014 and beef prices are likely to remain high.
Peel also said total meat consumption of U.S. consumers will increase 4.2% from a year ago because of the added supply of poultry and pork.