With the threat of the COVID-19 pandemic receding in the United States, the broiler industry is looking strong in 2021.
In a WATT Poultry Chat interview, Mark Jordan, executive director of LEAP Market Analytics, shared economic data indicating the industry is in a period of strong profitability which is likely to last through the end of the year.
Austin Alonzo: We're about halfway through the year. Could you give us an update on the markets that are important to our viewers?
Mark Jordan: I want to jump right in and look at an overview of the broiler industry, specifically margins and costs. Right now is a really good time to be in the chicken industry. There's been a lot of turmoil to get to this point. But things are really good. We just wrapped up May, based on the cost and returns model I use. The broiler industry had record margins, well over 30 cents a pound on a ready to cook basis. The estimate I go with was about 37 cents a pound. You've got to go back to June, I believe of 2004 to see margins above 30 cents a pound. Also, I think August-September of 1998. And I'm thinking July-August of 86. I looked at some points this, is kind of rare air so to speak. The good news, again, kind of the out of this is that in each of those times were such a cushion built up that it was a good year, year and a half at least before the industry was anywhere near red ink. So it really built up a good cushion of very strong demand, you've got wing prices that are finally starting to ease back just a little bit. But I mean, you know, who would have thought we would see this run well past the $3 mark. Boneless white meat prices, top $2 a pound, we're kind of getting into that situation where we start to pivot a little bit seasonally on white meat, we've gotten through the Memorial Day weekend holiday. And I've got an eye now on July 4, so we're still on a good time period.
As we get past that midpoint of the year, though, you know, the seasonal demand does typically ebb for some of those products, but really good situation right now. And I've got a chart here, that kind of shows the situation. So viewers can see that industry margins should look good, at least out to the rest of this year. And I think 2022 is shaping up to be pretty strong as well.
Now, switching gears a little bit, we've still got some cost pressures, the feed input markets have been a little crazy. They're definitely stronger than they were a year ago at this time. They have been kind of volatile if you follow the futures board, I think those pressures remain. We're in kind of an interesting period where there's a lot of uncertainty about the 2021 crop season. So acreage is yet to be fully defined, obviously a bit early to know a lot on the yields. And so I still think there's some issues there where we're going to be looking at some high feed costs, absent a really in quite a few breaks in terms of added acreage coming into the mix some really good yields.
So feed costs remain an issue. Labor and other there's some other issues: building materials, we've got a lot of inflation on some of these inputs. So cost situation is not going away. There's some pressures there. But I do think the broiler industry in aggregate is really in the driver's seat right now. And in a strong financial position.
Austin Alonzo: Alright, Mark, was there anything else you want to touch on?
Mark Jordan: It seems like every year everybody's like, "Watch the next report." But the acreage report, (the U.S. Department of Agriculture) is just now wrapping up its June survey. And so those results will be made at the end of this month with updated corn acreage, soybean acreage and the markets probably going to be a bit jittery. Until then, maybe a bit afterward. But this could really be the the driving point or the pivot point as to whether we see corn, you know, move a little more towards seven or eight even $8 on the futures board or maybe back off, you know, calm down a little bit and even come back. So we're in a really pivotal stretch here on the feed costs front.
Transcript edited for length and clarity.
