The United States should export 5.3 billion pounds of poultry this year, the department said in its monthly crop report. That's a drop of 95 million pounds from last month's projections.
Companies, not farmers, are feeling pressured. Chicken and turkey farmers generally get steady prices from chicken companies.
Bird flu "is having a negative effect on international demand," John Tyson, chairman and CEO of Tyson Foods Inc., said last month in remarks to the Consumer Analyst Group of New York. Arkansas-based Tyson has more than one-quarter of the nation's poultry market.
Prices for leg quarters, the chief product sold overseas, have plummeted from 40 to 50 cents a pound last fall to around 15 cents, Tyson said.
"Long term, those issues will subside," Tyson said. "But it's still going to be tough short term."
The Agriculture Department's top economist downplayed the drop in the export forecast. The decline was "fairly modest," chief economist Keith Collins said Friday.
"We're still expecting poultry exports year-over-year to go up," Collins said in a statement. "Our major poultry export markets are places like Russia and Mexico and China, and they continue to buy from us."
Indeed, last year's poultry exports were 5.14 billion pounds, lower than the 2006 forecast.
Despite fears of bird flu, demand by U.S. consumers should stay strong, the department said.
The average person is expected to eat 87.7 pounds of chicken this year, up from a forecast of 87.2 pounds last month. Americans ate an average of 85.8 pounds of chicken last year, the department said.
The industry is keeping an eye on consumer confidence, said Richard Lobb, spokesman for the National Chicken Council.
"So far, we've not seen any impact, but we're reviewing our options to see what we need to do to keep it that way," Lobb said Friday.
While sagging exports and rising production have kept poultry prices low, prices for beef and pork should remain steady, the department said.
Also Friday, the department raised its price forecasts for corn and soybeans, lowered projections for the price of rice and made no change in the forecast for wheat prices.
Drought continued to stress winter grains across the southern Plains and the Southwest and is spreading north through the central Plains, the department said. Drought also persisted in the central Corn Belt, according to the report.
Snow helped protect Nebraska's winter wheat from a bad cold snap last month, but Montana's wheat was less protected against temperatures that dipped as low as minus-30 degrees, according to the report.
By Libby Quaid