Update of Poultry Fundamentals April 18

Transcription

1 Update of Poultry Fundamentals April 18 Contact us: Visit our updated website Follow us on 4/13/2018 AdvancedEconomicSolutions 1

2 Discussion Broiler producers are cutting back on the size of the broiler supply flock, presumably in an effort to combat smaller profits. Protein prices are under immense bearish pressure, and recent developments in Argentinian soybean crop have caused soymeal prices to surge. A decline in production potential is reassuring, but producers were already holding chicken output to levels only modestly ahead of YA levels. That trend continues, with recent production growth falling short of 1%. Weak production growth will likely persist throughout most of Producers are probably aware that waiting for beef and pork producers to move into a dire margin situation is the best time to ramp up production. Given the amount of beef and pork expected during this year, it may be reasonable to anticipate more substantial chicken production growth in The price outlook for 2018, given weak production trends, is moderately bullish. Turkey producers are facing negative margins, with whole bird prices remaining weak despite relatively strong export activity. Producers have taken decisive action, slashing poult numbers in an effort to curb output, which is already below YA levels. The price outlook is quite bullish as prices have surged recently. Only minor AI outbreaks have been reported in the US so far this year, and no substantial disease spread has occurred. The cases have been low pathogenic, and have failed to make headlines. The risk is present through June. Chicken production was up -0.2% over the past 90 days The broiler supply flock was up 3.1% YOY as of March 1st Chicken exports were up 1.2% YOY during February Total chicken in cold storage was up 15% YOY on March 1 st ; Wing inventories approaching YA levels Turkey production was down 1.3% over the past 90 days Turkey hatchery data shows poult placements down 3.3% YOY during February Turkey exports were up 9.9% YOY in February Total turkey in cold storage was up 13% YOY on Mar 1 st, with breast meat inventories up 16% YOY 4/13/2018 AdvancedEconomicSolutions 2

3 Lbs $/Lb Executive Summary: Major Proteins Producer margins vary, but production of major proteins is mostly higher regardless Exports have been strengthening, but risk of weaker exports looms as trade disputes heat up Meat supplies are expected to exceed YA by more than 2% this year Cattle, Hog, Broiler, & Turkey Producer Spot Margins (0.10) (0.20) (0.30) Forecast Cattle Margins Hog Margins Broiler Margins Turkey Margins Total US Meat Trade (Million Lbs) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, % -6.1% 3.2% 14.6% 8.6% -17.0% 12.9% 1.6% 3.9% -1.3%-0.9% 28.1% -6.0% 3.5% -8.8% 6.3%5.7% 4.4%-2.0% 14.1% -2.9% -10.7%-0.6%-15.2%2.4%-7.4%-8.9% 5.1%4.1% 24.6%13.5% -7.6%0.2%0.1% % Per Capita Meat Supplies Beef, Pork, Chicken, & Turkey -2.5% -0.9% -1.9% -1.1% 0.7% -0.6% 4.4% 1.6% 1.1% 2.1% Imports Exports 4/13/2018 AdvancedEconomicSolutions 3

4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 000 Head Executive Summary: Chicken The broiler supply flock is still much larger than YA, but is shrinking counter-seasonally as producer margins erode On a 13-week basis, chicken production growth is actually negative vs YA Per capita chicken supplies are expected to be up fractionally during ,000 58,000 57,000 56,000 55,000 54,000 53,000 52, % 3.5% 3.1% Broiler Supply Flock W/ YOY Change 2.0% 0.5% -0.6% -0.9% -1.2% -1.6% -1.1% -0.8% -1.0% 10% 8% 6% 4% 2% 0% Live Weight Chicken Production: YOY % Change 13-Wk Avg -2% /13/2018 AdvancedEconomicSolutions % -4.4% 5-Yr Avg F 2018 Per Capita Chicken Supplies 3.3% 0.7% -3.0% 1.9% 1.8% 6.6% 0.9% 1.6% 0.5%

5 $/lb Executive Summary: Turkey Turkey producer margins have tanked on lower whole bird prices Production growth has been mostly negative over the past 6 months Weak production growth will likely drive negative turkey supply growth this year Estimated Turkey Producer Margins (0.10) (0.20) Month Avg Forecast Actual Current % 10% 5% 0% -5% -10% Live Weight Turkey Production: YOY % Change 13-Wk Avg -15% /13/2018 AdvancedEconomicSolutions % -4.0% Per Capita Turkey Supplies -3.0% -1.8% -0.6% 0.0% -1.3% 1.3% 3.8% -1.2% -1.2%

6 Chicken Fundamentals 4/13/2018 AdvancedEconomicSolutions 6

7 cents/lb Millions of Dollars - Sanderson Millions of Dollars - Pilgrim's Broiler Producer Margins >Broiler margins are positive with positive outlook >Major producer net income is positive by weakening unlikely to move negative for long 35 Estimated Broiler Producer Margins Major Producers: Quarterly Net Income (5) 0.2 (20) (60) (10) 0.1 (40) (120) (15) (60) (180) 6-Month Avg Forecast Weekly Current Sanderson Pilgrims % YA 4/13/2018 AdvancedEconomicSolutions 7

8 Index (Jan 2007 = 100) Broiler Feed Price Index >Feed costs expected to remain relatively low this year and next >South American soybean crop issues more than offsetting Chinese soybean import duties Pro Forma Index of Broiler Feed Prices w/ Forecast /13/2018 AdvancedEconomicSolutions 8

9 Broiler Supply Flock & Hatchery >Mar 1 supply flock 56.3 million hens, up 3.1% YOY >Growth expected to slow and turn negative by midyear 4/13/2018 AdvancedEconomicSolutions 9

10 Production by Size Total Production Broiler Production >Total broiler production YoY: 4-week +0.9% 13-week -0.2% 52-week +1.3% YTD +0.1% >Slaughter YoY: YTD -0.6%, 13-week -0.9% Weights YoY: YTD +0.6%, 13-week +0.36% 22.0% Chicken Production Growth by Size (52-Week Moving Average) Weekly Liveweight Chicken Production (52-Week Moving Average Thousands of Lbs) 340,000 1,000, % 18.0% 16.0% 320, , , % 12.0% 280, , % 260, % 6.0% 240, , % 2.0% 0.0% 220, , , % 180, , % -6.0% -8.0% 160, , , % -12.0% , ,000 Small Bird Production Growth Large Bird Production Growth Small-Med Prod Growth Med-Large Prod Growth Total Small Bird Production Total Production Large Bird Production 4/13/2018 AdvancedEconomicSolutions 10

11 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Broiler Production >2018 production: 41.9 billion lbs, % YoY (AES Forecast) 10,700 Quarterly U.S. Broiler Production w/ AES Forecasts 10,200 9,700 9,200 8,700 Q1 Q2 Q3 Q4 5-Yr Avg Chicken Production w/ AES Forecasts YOY % Change 6% 5% 4% 3% 2% 1% 0% -1% -2% 1.5% 1.6% 1.6% 3.1% 4.7% 4.2% 5.5% 1.1% 3.3% 2.3% -0.3% 1.3% 1.9% 1.5% 2.1% 4.0% 1.6% 1.1% 1.7% -1.6% 4/13/2018 AdvancedEconomicSolutions 11

12 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 000 lbs 000 lbs Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 000 lbs 000 lbs Chicken in Cold Storage >March 1st Total inventories: +15% YoY >Breasts +6.5% LQs -25% Wings -2% Chicken in Cold Storage ("FOM") LQs in Cold Storage ("FOM") 950, , , , , , , , , , ,000 80, Yr Yr Breast Meat in Cold Storage ("FOM") Wings in Cold Storage ("FOM") 220,000 90, , , , ,000 80,000 70,000 60, ,000 50, Yr Yr 4/13/2018 AdvancedEconomicSolutions 12

13 M Lbs Chicken Trade >The US exported 552 M lbs of chicken in February, up 1.2% YOY >USDA expects 2018 exports to exceed YA by 2.5% 660, , , , ,000 YTD: -0.1% 6,650,000 6,450,000 6,250,000 Chicken Exports Ann Exports % -1% -2% -3% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5-Yr Y Ann Exports % ,918, ,555,285 13% ,807,184-13% ,920,013 2% ,783,454-3% ,202,730 9% ,205,457 0% ,903,997 13% ,960,761 18% ,817,938-2% ,762,148-1% ,977,612 3% ,274, % ,345, % ,304, % ,321, % ,644, % ,780, % ,950, % 4/13/2018 AdvancedEconomicSolutions 13

14 1/1/2013 3/1/2013 5/1/2013 7/1/2013 9/1/ /1/2013 1/1/2014 3/1/2014 5/1/2014 7/1/2014 9/1/ /1/2014 1/1/2015 3/1/2015 5/1/2015 7/1/2015 9/1/ /1/2015 1/1/2016 3/1/2016 5/1/2016 7/1/2016 9/1/ /1/2016 1/1/2017 3/1/2017 5/1/2017 7/1/2017 9/1/ /1/2017 1/1/2018 3/1/ Lbs Chicken Trade Detail 700,000 Total US Chicken Exports by Trade Partner 600, , , , , ,000 - Mexico Russia Angola Canada Cuba Other 4/13/2018 AdvancedEconomicSolutions 14

15 B/S Chicken Breast 4/13/2018 AdvancedEconomicSolutions 15

16 Chicken Wings 4/13/2018 AdvancedEconomicSolutions 16

17 Cents/Lb Wings Continued 230 Wing Prices by Size Small Small Forecast Medium Medium Forecat Jumbo Jumbo Forecast Size This Wk Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann % YoY Jumbo Medium Small % % -11.8% % 6.6% 4/13/2018 AdvancedEconomicSolutions 17

18 Leg Quarters 4/13/2018 AdvancedEconomicSolutions 18

19 AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % Wings (Jumbo) % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q MDC <15% % Fat, Fresh % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q4 117 White Trim, % <15% Fat, % Fresh % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q Chunk Meat % Chicken % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q Tenders, Line % Run, Clipped % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % Tenders, Small % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % Thighs % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % B/S Thigh % % % /13/2018 AdvancedEconomicSolutions 19

20 AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q Chicken Leg % Meat % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q Drumsticks, % Bulk % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q WBE/Broiler % Cutout % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % WOGs (Small) % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % B/S Breast % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % Wings (Small) % % % AES, Inc. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ann Avg % YA Q1 Q2 Q3 Q % Leg Quarters % % % /13/2018 AdvancedEconomicSolutions 20

21 Price Inflation >Wholesale chicken prices: -5.1% YOY over the past 3 months >Retail chicken prices: +2.6% YOY over the past 3 months 40.0% Chicken PPI vs Chicken CPI (YoY % ) 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% End-User Margin Compression PPI Chicken CPI Chicken 4/13/2018 AdvancedEconomicSolutions 21

22 Turkey Fundamentals 4/13/2018 AdvancedEconomicSolutions 22

23 $/lb Turkey Producer Margins & Hatchery >Margins remain negative as producers struggle with sharply lower whole bird prices >Producers are responding with major cuts to poult production (0.10) Estimated Turkey Producer Margins (0.20) Month Avg Forecast Actual Current Turkey Poults Hatched Turkey Poults Placed 26,000,000 24,500,000 25,500,000 24,000,000 25,000,000 23,500,000 24,500,000 23,000,000 24,000,000 22,500,000 23,500,000 22,000,000 23,000,000 21,500,000 22,500,000 21,000,000 22,000,000 20,500,000 21,500,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 20,000,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5-Yr Avg Yr /13/2018 AdvancedEconomicSolutions 23

24 Turkey Slaughter & Weights >During the past 13 weeks, turkey production was down 1.25% YoY >Weights are down 0.7% YoY during that time 15% 13-Week MA Turkey Production Week MA Turkey Weights % % % % % % /13/2018 AdvancedEconomicSolutions 24

25 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Turkey Production >2018 production (USDA): 5.95 billion lbs, down 0.6 YoY 1,650 1,600 1,550 1,500 1,450 1,400 1,350 1,300 Quarterly U.S. Turkey Production Q1 Q2 Q3 Q4 5-Yr Avg Turkey Production YOY % Change 15% 12.1% 10% 6.9% 7.3% 9.4% 5% 0% 2.6% 0.4% 3.7% 3.7% 1.4% 0.4% 0.5% -5% -3.9% -2.7% -4.0% -2.5% -2.4% -1.5% -1.8% -10% -8.7% -8.5% 4/13/2018 AdvancedEconomicSolutions 25

26 Turkey in Cold Storage >March 1 st Total: +13% YoY >Whole bird +20% YoY Breasts +16% YoY MST +13% YoY 000 lbs 000 lbs Jan Jan Feb Feb Mar Mar Apr Apr May May Jun Jun Jul Jul Aug Aug Sep Sep Oct Oct Nov Nov Dec Dec 660, , , , , ,000 Turkey in Cold Storage 5-Yr ,000 Turkey Breast in Cold Storage 75,000 25,000 5-Yr /13/2018 AdvancedEconomicSolutions 26

27 M Lbs Turkey Trade >US exports of turkey were 48 million lbs in February, up 9.9% YOY >Absent an AI outbreak, exports could be stronger on the year, supporting 6% prices 70,000 65,000 60,000 55,000 50,000 45,000 40,000 YTD: 12.2% 300, , ,000 - Turkey Exports Ann Exports % 3% 0% -3% -6% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5-Yr Y Ann Exports % , ,999 9% ,579-10% ,714 10% ,500-9% ,550 29% ,608-4% ,522 0% ,252 24% ,834-21% ,800 9% ,307 21% , % , % , % , % , % , % , % 4/13/2018 AdvancedEconomicSolutions 27

28 Turkey Prices 4/13/2018 AdvancedEconomicSolutions 28

29 Update of Poultry Fundamentals April 18 Contact us: Visit our updated website Follow us on 4/13/2018 AdvancedEconomicSolutions 29