Big Chicken Supply May Soften Spring Hog Rally

KANSAS CITY - Record large frozen chicken supplies and low leg-quarter and breast prices resulting from a significant decline in chicken exports over the past few months may soften the seasonal rally normally seen in hog prices, market analysts and agricultural economists say.

Ron Plain and Glenn Grimes, agricultural economists at the University of Missouri, said large supplies of a low-priced competitive protein are always a concern for the other meat categories.

Both spoke on the sidelines of the National Pork Industry Forum, which was held in Kansas City Thursday through Saturday.

Plain said part of the weakness in hog prices so far this year, compared with expectations, is likely due to the availability of very cheap chicken since the poultry industry has suffered significant setbacks in export sales.

Concerns about H5N1, a highly pathogenic strain of avian influenza, in Asia and Europe have caused consumers to eat less poultry, Plain said. The U.S. has built a big export business with Russia and other areas of Eastern Europe, but consumers there were eating less chicken, so those countries are not importing as much.

So far, none of the major chicken processors in the U.S. have reduced production nor have they given any indication that they will cut back any time soon. The U.S. Department of Agriculture's latest weekly egg-set and chick placement report shows the broiler industry put 1% more broiler eggs into the incubators last week, compared with a year ago. This was on target with the year-to-date average.

Chicken leg-quarter prices on a full-load delivered basis into the U.S. northeast currently are quoted at 18 to 19 cents per pound, down more than 60% from the end of the third quarter 2005. Leg-quarter prices at this time a year ago were around 31 to 32 cents into the Northeast.

Source: CattleNetwork