POSITVE  BROILER   MARGINS

The number of eggs set in the top 19 broiler hatchery states, reported by NASS in Broiler Hatchery weekly, was below expectations, in fact, some weeks were below a year ago. Year-over year gains at the beginning of 2014 were as large as 2.8%, and hovered in the 1.5% to 2% range for the first 5 weeks. Since then egg sets fell to mostly equal with a year ago to up 1% in the most recent week. Broiler producer margins eroded precipitously last fall due to rather lackluster product demand (foreign and domestic) and historically high soybean meal costs. Beginning in March, those margin calculations turned up rather dramatically, mostly because of higher product prices

Georgia Dock Broiler prices (2.5-3lbs) are strong so far this year, ranging from 3% to 5% above a year ago, but those prices are tied to small birds. Larger birds are the dominate market category: the national broiler composite price posted significant year-on-year decline up until the last few weeks.  Broiler pieces have been weak throughout the first quarter with the exception of breast meat rebounding slightly in March. Leg quarters have taken the largest hit averaging 15% lower than year earlier for the first 13 weeks of 2014, reflecting soft demand by overseas markets.

Broiler producer margins rounded the corner in March, moving from breakeven to positive (about 6 cents per pound for larger birds). However, egg sets take time to ramp-up. Typically, poultry production requires an increase in the breeding flock to produce a greater number of eggs to be set and carry through to broiler production. The latest USDA-NASS Chicken and Eggs report (March) showed the breeding flock has increased by 2% from a year earlier on March 1. Additionally, winter weather restrained layer productivity earlier this year this year. The number of eggs set should begin increasing compared to a year ago soon.

Longer term, LMIC broiler profit estimates indicate broiler margins will be very strong well into 2015, averaging about 10 cents per pound. Those profits will continue to fuel breeding flock growth and hence eggs set. Still, by historical standards, growth in production may remain a bit subdued due to uncertainty in: 1) feedstuff costs, especially soybean meal; 2) export demand for chicken; and 3) how much market share can actually be gained domestically due record high annual red meat prices.