Thomas Elam, president of FarmEcon LLC, told members of the National Turkey Federation 2013 could be “the worst year in the industry” during the federation’s annual convention on February 14.
While most meats are increasing in price , turkey meats are actually poised to drop, based off of weakness in the breast-meat markets. U.S. turkey production numbers for 2013 look to be very similar to those of 2012, give or take 1 percent, according to Elam’s projections. But any growth will be muted by higher grain prices and lower meat prices, Elam said.
“If we combine these price forecasts with even higher feed costs than last year, it could be a real disaster,” Elam said.
Turkey prices
From 2009 to 2011, turkey farmers were raising more turkeys and still selling them at higher prices. But, those boom days are over, Elam said. In 2012, the price did not change, but the volume produced went up by 100 million pounds.
After a record production year, Elam said current pricing and higher ending stocks imply the demand will not be as high, and there will be no need for turkey industry growth in 2013. However, the U.S. Department of Agriculture just released its supply and demand reports. These reports call for turkey exports to increase by 100 million pounds.
“I’ve never seen that big of a percentage change, ever, in any export number in that report. That is huge,” Elam said. “You went from 700 million pounds to 800 million pounds.”
Higher exports will be the source of demand strength, Elam said, as domestic demand has been fragile. However, the 2012 exports supported only the dark-meat markets, while white-meat demand and prices declined. Elam estimates a 10 percent decline in price for turkey breast meat for 2013.
Elam also anticipates a new heavy tom capacity coming on line, which is likely to further pressure 2014 breast meat pricing.
Feed costs
As Elam looks forward to the next two years, he sees huge feed cost risks, both upside and downside.
To start with, he said, there is a record low inventory for soybean stocks and a massive shortage of corn. With much of the grain-producing regions of the U.S. still in severe drought, it is highly possible that fewer acres of corn will be planted, keeping feed prices at high levels.
Elam anticipates that the United States Department of Agriculture will forecast a 14.5 to 15 billion bushel corn crop, but he thinks the risk of not harvesting that much in 2013 is almost 100 percent. “We need at least 145 bushel corn just to keep prices flat,” he said.
Elam believes that in order to meet the Renewable Fuel Standard for ethanol production and produce enough feed for all meat and dairy animals, as well as restore U.S. export levels, higher yielding corn will be required. The U.S. will need beyond 95 million acres of corn yielding 165 bushels per acre.
“That’s not going to happen, not for a long, long time. We don’t have the genetic potential to make that happen,” he said. “If we don’t get timely rain starting in April, we’re not going to have a good corn crop in the Western Corn Belt. There are just no soil reserves there for corn to grow, or beans either.”
