September 2014
Ag Insight

Ag Insight

Processed Products Dominate U.S. Poultry Production

The U.S. poultry industry has grown considerably during the past 50 years, but major internal changes also have occurred and have spurred production even more.

In the early 1960s, more than 80 percent of broiler production was marketed as whole birds, and only 2 percent as further processed products. Recent figures from the U.S. Department of Agriculture’s Economic Research Service show only about 12 percent of production now is being marketed as whole birds, as output shifted to cut-up parts (42 percent of production) and to further processed products such as boneless chicken, breaded nuggets and tenders, and chicken sausages (46 percent of production).

The shift to cut-up and processed products spurred growth in demand for chicken, which in turn brought about production increases. Different products come from birds of different sizes, and changes in demand composition have shifted production toward larger birds for processed products.

Smaller broilers are usually marketed bone-in (whole or cut into parts) to the fast-food and food service sectors while intermediate sizes are normally marketed to retail groceries in tray-pack or bagged forms.

The largest birds can be sold whole as roasters, but are also marketed deboned and processed into parts and value-added products. Growing and processing birds of such widely varying sizes requires tight coordination between the hatchery, grow-out, slaughter and processing stages.

Rising Stocks Weigh on World Cotton Prices

USDA projections indicate that world cotton stocks will rise for a fifth consecutive season in 2014/15 (August/July marketing year), leading to continued downward pressure on global cotton prices.

 
   

Global ending stocks are now projected at a record 102.7 million bales for 2014/15, nearly 4 percent above 2013/14.

Cotton stocks increased over the past several seasons after relatively high cotton prices led simultaneously to higher global production and slowed growth in cotton mill use. The rise in global stocks has largely occurred in China due to government policies, including national reserve purchases that have supported global cotton prices by effectively keeping supplies out of the marketplace.

Stocks in China at the end of 2013/14 are estimated at 60.3 million bales, or 61 percent of global stocks, and are not projected to change significantly in 2014/15. Cotton prices jumped to average $1.65 per pound in 2010/11 in response to tight global stocks, but have weakened since.

As a result, the world cotton price is expected to decrease from an average of 92 cents per pound during 2013/14 to about 80 cents per pound in 2014/15.

Global Corn Ending Stocks Expected to be Highest in 15 Years

Global corn stocks are forecast to rise to the highest level in 15 years by the end of 2014/15 (September/August), leading to downward pressure on U.S. and global corn prices.

Stocks fell to relatively low levels during 2003/04-2006/07 before the 2008 spike in world commodity prices. Now, they are forecast to reach 188.1 million tons in 2014/15, just 3 percent below the recent high of 194.4 million tons in 1999/2000.

Since 2008/09, world corn production has exceeded total consumption in 5 out of 7 years. In addition to the United States and China, the two largest global producers and consumers of corn, production and stocks have been generally rising in Brazil, Russia and Ukraine, countries that are also playing an expanding role as corn exporters. With a second consecutive above-trend corn harvest forecast for 2014/15, the United States is expected to account for most of the 8-percent increase in global corn stocks forecast in 2014/15.

With growing inventories, the U.S. season average farm price of corn is expected to decline to $4 per bushel, down 10 percent from $4.45 per bushel in 2013/14, and 42 percent from $6.89 per bushel in the drought year of 2012/13.

Coverage of Federal Crop Insurance Programs Is Expanding

Producers of corn, soybeans and wheat, the three largest crops produced in the United States, are the largest consumers of Federal crop insurance, although producers of other crops are a growing share of program enrollment.

In 1997, corn, soybeans and wheat crops accounted for 80 percent of all acres enrolled in the program. Including cotton and sorghum raised the share to nearly 90 percent.

With new types of policies being offered and more crops added to the program, the share of enrolled acres attributed to these major crops fell to a total of 75 percent as participation in the Federal crop insurance program continued to rise. Pasture, forage and range land have accounted for the bulk of recent gains in enrolled acres, expanding from zero in 1997 to 48 million acres in 2012.