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Chicken slaughter for the week ending November 21st was down 1.1% from the year prior but is an “improvement” from slaughter levels being down 3%-4% during October. The six-week sum of ready-to-cook production is 2.3% below year ago levels and continues to lend support to the front half of the bird. Wing prices remain in the mid-to-upper $2.20s, bucking the usual lower seasonal trend into year’s end. Tender prices have remained firm throughout November, despite seasonal expectations for weakness to extend into late month and breast meat prices are edging higher. Anticipate price softness across the wing markets, but breasts and tenders are anticipated to headed higher.
Packers put together a decent end of week holiday kill last week, and beef production, at 473.9 million pounds, was up 2.2% from the same holiday week a year ago. Beef prices continued higher throughout last week, with the rib complex continuing to lead the way. Yet, the astounding upside is expected to give way to sharp seasonal price losses into the late fall, with forward sales across the109E ribeyes reported near the $6.00 mark throughout the week prior to Thanksgiving. The beef trim and grinds complex have, however, remained depressed and anticipated seasonal price increases may be only modest, going into 2021.
Pork production, while expected to increase throughout December may struggle to top the 2020 Q1 peaks. Still, seasonally larger production will likely pressure the USDA cutout lower into late year. From the $1.70s, the bellies have come under significant pressure, pricing below the $1.00 mark throughout late November. While running near 9% back of last year, there may be modest downside for belly prices into late 2020, but seasonal increases are likely throughout January. Pork 42s have faded, and choppy sideways pricing is expected into the new year.
The snow crab markets remain historically inflated. The Alaskan Bering Sea snow crab fishing season is progressing, but the bulk of the landings are not expected to occur until after January 1st. The 2020-21 Alaskan Bering Sea quota has been set at 45 million pounds which is 32% bigger than the previous season and a multi-year high. However, fairly limited world snow crab supplies are anticipated to persist which could underpin prices.
The tomato markets are weakening as supplies improve. Total U.S. tomato supplies have improved considerably as of late tracking 20% plus above year ago levels. The tomato harvest is expected to continue to improve in the coming weeks which should weigh on the tomato markets. However, the seasonal tendency in the tomato markets during December is for prices to rise due to weather challenges. This may temper any pending downside in the tomato markets. Lettuce supplies are recovering as well which should weigh heavy on prices.
THE KITCHEN SINK
The CME spot butter market is the lowest in seven months. Per the USDA, U.S. October butter inventories were up 28% (y/y) but declined 12.7% from September which is not unusual during the holiday baking season. Still, the downside risk for butter prices from here is likely nominal. The CME cheese block and barrel markets have fallen to their lowest levels since August. October domestic butter stocks were down 0.2% (y/y) and fell 1.3% from the prior month. Cheese prices may have some additional downside potential from here but may find support soon from the likelihood of increasing export demand.
Erratic weather in South America and strong export demand have supported to the corn and soybean complexes during the last several weeks. Wheat prices have softened some as of late. Bigger that expected crops in Russia and Australia, two major wheat exporters, are helping perceptions around world wheat supplies.
Last week nearby WTI crude oil futures finished the highest since February. A softening U.S. dollar plus anticipation of COVID vaccine(s) distribution is boosting economic growth expectations. Crude oil prices may hit resistance at $47.75/bbl.