Analysts seeking clues to the outlook for the poultry industry say egg sets, bird weights and export demand will set the direction in the next few months.
Stephens analyst Farha Aslam, in a research note on Pilgrim’s Pride, noted the company expects lower bird weights to reduce industry production. Weights surged 2.5 percent in August due to early processing of heavy birds in response to the rise in grain costs.
Now bird weights have begun to stabilize, she said, and their direction in the next few weeks will shed light on the industry’s production discipline.
Pilgrim’s anticipates weekly egg sets need to stay in the 180-185 million range to pass along high grain prices. Aslam said they have averaged 185-186 million over the past four weeks.
“The key test will be in November, a period when the industry usually increases egg sets in preparation for the post holiday demand period,” Aslam wrote.
Last year, November weekly egg sets averaged 193 million, she said.
BB&T Capital Markets analyst Heather Jones said export demand will be critical to determining the magnitude of the price response to any protein liquidation.
Exports now comprise 20 percent of total chicken and pork production, and demand is growing, she said.
“We strongly believe that the U.S. is well positioned over the long-term to benefit from expanding global protein demand due to its inherently more cost-efficient and productive grain/oilseeds production, as well as its cost-advantaged protein production processes.
The fact that the US dollar is widely expected to depreciate over the long-term is just icing on the cake.
However, the outlook over the next year is more uncertain,” Jones said.
Competing countries in the export market are all facing challenges in 2013 that may hurt their price competitiveness, she said.
The weaker U.S. dollar will help U.S. chicken and pork exports, but beef exports are likely to be sluggish, she said.
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