Poultry

The impacts of COVID-19 continue to affect the poultry industry, even years after the height of the pandemic. When shutdowns occurred in 2020, food service needs changed drastically and significantly altered demands on the poultry industry. In 2022 when life started returning to normal, food service shifted back to pre-COVID lifestyle with more people going back out to eat, schools serving meals again, and the industry having to adjust to previous market demands.

Given placements of birds had returned to normal, and live weights have increased prior to 2022, the supply of chicken was abundant going into fourth quarter 2022.24

Egg markets were also affected by the massive change in consumer behaviors from pre-COVID to post-COVID and coupling that with the outbreak of Highly Pathogenic Avian Influenza (HPAI). Nationally, HPAI eliminated a large number of layer flocks in 2022, resulting in a challenging year for egg markets. On a positive note, record high prices were set for broilers and turkeys. Within the Horizon Farm Credit territory, the HPAI outbreaks impacted more than just the farms with an outbreak. Farms located in HPAI control areas experienced longer layouts during times when outbreaks were in their area. However, in the areas where HPAI was not as prevalent, layout times for birds returned to a more normal schedule in 2022, similar to those experienced pre-COVID.

Other updates within Horizon Farm Credit’s territory in 2022 included several integrators bringing new processing facilities online and others remodeling facilities. Integrators within the regions were also looking to expand and increase square footage, however high material cost and rising interest rates have delayed much of this from happening.

HPAI is a concern for the poultry industry across the United States. Outbreaks continue to impact farms across Horizon Farm Credit’s footprint, with confirmed positive flocks being euthanized and layouts being extended on farms within the control area. As a result of the outbreaks, there has been a decrease in egg inventory, resulting in skyrocketing prices at market. Additionally, due to the destruction of turkey flocks, the turkey export market has been limited. While integrators are looking to increase square footage, this is being hampered by the current interest rate market, coupled with the increased cost of construction. Supply chain constraints result in delays in receiving parts and equipment needed by growers to repair or upgrade existing houses. High grain and feed prices continue to affect net profit margins. High interest rates delay construction and other purchases.

As with all agricultural industries, labor shortages and environmental issues are prevalent in the poultry industry. It is difficult to find laborers to work on farms and in processing plants. Environmental regulations make poultry operations and expansions a more challenging process.

Animal welfare continues to play a role in poultry production, with more layer operations converting to cage free, organic operations requiring more management such as birds to roam outside during optimal temperatures, and the continued improvement in growing conditions for all types

of poultry production. Consumer demands for healthy chicken and eggs will require the poultry industry to focus on animal welfare issues in order maintain long-term sustainability.

January 2023 broiler production totaled 3.963 billion pounds, an increase of 7.4 percent over January 2022. This is a result of both higher slaughter (6.1 percent over January 2022) and an average weight of 6.55 pounds, the highest ever for January. A revision to December data brought the 2022 total up by 5 million pounds to 46.206 billion pounds. The first-quarter broiler production projection was adjusted up to 11.4 billion pounds on the strength of January production. This would be 2 percent higher than the first quarter of 2022. The annual production forecast for 2023 is 46.750 billion pounds, an increase of 1.2 percent over the 2022 total.

On positive note, while the past few years have experienced lower bird placements, a record of 6.6+ lb. birds of average live weight was experienced in 2022, a new record high, thus offsetting the lower numbers of birds being placed.

Monthly average live weights, 2018–2023 Pounds

Source: Livestock, Dairy, and Poultry Outlook, March 2023, https://www.ers.usda.gov/webdocs/outlooks/106119/ldp-m-345.pdf?v=1399.3

Trade markets will also continue to affect the poultry industry, with Brazil expected to lead with the most exports. This can be attributed to the restrictions currently placed on locations experiencing HPAI, and at this time, Brazil remains free of the disease. The restrictions placed on the U.S. are generally localized to a state or county, as opposed to the entire country. Given this ongoing threat, significant expansion within the industry will continue to be hampered.

Broiler meat in cold storage fell seasonally from the end of December to the end of January, but it was still 12.3 percent higher than last January's levels. The category of "other parts and forms" still makes up the largest portion of the broiler meat in cold storage. Leg quarters in cold storage had the largest absolute decrease, falling 17.8 million pounds from last January. Breasts and breast meat increased the most from last January, adding 78.1 million pounds. Based on the overall strength in stocks, the 2023 ending stocks projection was adjusted up to 860 million pounds.

The poultry industry across the Horizon Farm Credit territory is expected to remain strong in 2023, with some challenges. HPAI is expected to significantly impact the industry again this year, along with high production costs.

As consumers begin to experience budgetary constraints as a result of inflation and rising interest rates, consumption of cheaper protein sources is expected to increase. The graph on the next page shows USDA’s supply and demand estimates on red meat and poultry production with expected strong increases in both broilers and turkeys.

Livestock, Dairy, and Poultry Outlook: March 2023, LDP-M-345, March 14, 2023. USDA, Economic Research Service decline since 2015. After 2 consecutive years of decline, commercial pork production is forecast to increase in 2023 on higher slaughter and fractionally higher carcass weights. Broiler meat production forecast to continue its longstanding upward trend into 2023, increasing marginally over last year’s record production. Turkey production is expected to increase throughout 2023, under the assumption that the sector recovers from Highly Pathogenic Avian Influenza outbreaks.