1. Vol. 10, No. 149 August 2, 2012
Under the “Finally Some Good News” heading, we start
today’s message with news that Mexico has announced that it
BROILER HATCHERY FLOCK
Thousand Hens
will not impose anti-dumping duties on imports of U.S. chicken
60,000
leg quarters. That announcement came Wednesday from Mexico’s
Foreign Trade Commission (COCEX). It appears that the alleged
dumping was trumped by the need for chicken in the wake of a serious 55,000
avian influenza outbreak that has driven chicken prices higher in Mexi-
co. Mexico is our largest chicken export customer. 50,000
The case dates back to early 2011 and, in some meetings we November 2011: Smallest
attended this past spring, was a cause for major concern among U.S. flock since January 1997 at
45,000
broiler companies. There were rumors of a pending settlement late 50.103 million
last winter that fell apart early this spring and some observers were
concluding that duties were certain. But this all unfolded against the 40,000
backdrop of Trans-Pacific Partnership negotiations that are at least
fueling some semblance of reason in many quarters. 35,000
This case exemplifies the problems in the concept of
“dumping” when a given product is a part of a larger production unit. 30,000
Dumping has long been defined as selling below cost of production in 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
another market. But what is the cost of production of a leg quarter?
The average cost for the entire bird? Yes but no. The market has WEEKLY BROILER EGG SETS
clearly valued leg quarters lower than that average production cost for Thousand
many years so are broiler companies always “dumping” leg quarters? 220,000
Even in the domestic market? This same issue applied to Mexico’s
2011: -3.6%
claims a few years ago that the U.S. was dumping hams and pork 215,000
YTD 2012: -3.8%
shoulders into their market. Where “parts” are concerned, the cost of 210,000
production definition is seriously flawed.
And this issue suggests that a review of the current 205,000
chicken situation is in order. Profitability for broiler companies has
200,000
come to screeching halt as feed prices have risen. After getting back
in the black early this year, our estimates of broiler margins went neg- 195,000
ative again in June and will very likely stay in the red for the foreseea-
190,000
ble future given the run-up in grain costs. Soybean meal is very im- 2010
portant to broiler producers as broiler diets contain more meal than do 185,000 2011
pig diets. This component could see some help this spring if, as is 2012
180,000
expected, South American plantings are large and if, as is hoped, Average '06-'10
South American weather is favorable. 175,000
Other recent developments in the broiler business are: J F M A M J J A S O N D
 The broiler hatchery flock declined in July. That is really not news
since the hatchery flock usually grows from November or Decem- 21 — by 0.17%. This, again, is no cause for alarm from a supply
ber into June or July and then declines. That seasonal pattern is standpoint since the comparisons are to 2011 levels much lower
clear n the chart at top right. The news was the size of he de- than both 2010 and the 2006-2010 average. Expect these num-
cline. The 2.4% drop from June is the largest in the last decade bers to be close to year-ago levels the rest of this year. Place-
and likely marks a rather quick response to higher feed costs. ments now stand 3.8% lower than in 2012, year-to-date.
 Broiler egg sets exceeded year-ago levels for the first time in over  Broiler slaughter is down 4.9% year-to-date and was still 1.2%
a year the week of July 21. The increase was only 39,000 eggs lower than one year earlier as of July 20. This figure, too, will
or 0.02% but it was an increase after nearly 15 months of cut- catch up to 2011 in the weeks to come but we do not anticipate
backs. But we are not concerned about the positive number since any significant growth.
it comes in comparison to MUCH lower egg sets one year ago  Finally, broiler production got within 1% of last year the week of
and really represents more of the same for broiler numbers and July 21 but remains down 5% for the year. Slaughter weights
output. Broiler egg sets are down 3.8% year-to-date. which were higher in the first half of 2012 will be more compara-
 Chick placements also exceeded year-ago levels the week of July ble to last year henceforth.
The Daily Livestock Report is published by Steve Meyer and Len Steiner. To subscribe/unsubscribe visit www.dailylivestockreport.com.
Disclaimer: The Daily Livestock Report is intended solely for information purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade any
commodities or securities whatsoever. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are
attempted. Futures trading is not suitable for all investors, and involves the risk of loss. Past results are no indication of future performance. Futures are a leveraged investment, and because only a percentage of a con-
tract’s value is require to trade, it is possible to lose more than the amount of money initially deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their life-
style. And only a portion of those funds should be devoted to any one trade because a trader cannot expect to profit on every trade.
CME Group is the trademark of CME Group, Inc. The Globe logo, Globex® and CME® are trademarks of Chicago Mercantile Exchange, Inc. CBOT® is the trademark of the Board of Trade of the City of Chicago. NYMEX,
New York Mercantile Exchange, and ClearPort are trademarks of New York Mercantile Exchange. Inc. COMEX is a trademark of Commodity Exchange, Inc. Copyright © 2012 CME Group. All rights reserved.