The Dish, Market Report, December 13, 2018

Top of mind news

the farm


Chicken production for the week ending December 1st was up 35% from the previous holiday shortened week but was flat compared to last year. On a six-week rolling average basis, chicken production was up just .2%, but the six-week rolling average of chicks placed was down 0.9% from last year (the sharpest decline since November 2015). This suggests that chicken output gains could ease heading into early 2019. Languishing U.S. chicken prices appear to have bought some international interest. October chicken exports were up 4.2% (yoy), notching the largest export total for the month since 2013, and the third best for any month on record. Strong exports are likely to persist which could support wholesale chicken prices next year.


Last week’s cattle harvest came in at a whopping 667k head, the largest kill of this year, boosting beef production 3.7% vs. the year prior. While production of this magnitude was relatively unexpected (especially for early December), it has become abundantly clear that favorable packer margins and aggressive beef demand will continue to push production schedules higher. From a global perspective, exports remain brisk, up 5.2% in October (yoy) which accounted for 13% of domestic output. Key Asian export partners, South Korea and Japan, continue to lead the pack, showing no signs of slowing. If global demand holds strong, expect beef market values to exceed expectations into early Q1.


Despite a modestly larger slaughter schedule, pork production eased last week, down .4% from last year. Aggressive forward sales, plus stellar exports continue to lend support to the USDA pork cutout value. Wholesale ham prices were up 8% and bellies were up 10% from the previous week. In spite of those weekly price gains, the pork cutout was down 14% vs 2017. Despite ongoing trade woes, October pork exports were up 2.7% (yoy) and expectations are for further growth in 2019. And lastly, African swine fever remains a key concern for China.


the sea


Snow crab imports suffered during October. For the month, the U.S. imported 18.2% less snow crab than the previous year. Further, those imports remained expensive due to the relatively tight world supply. World snow crab supplies are expected to remain relatively limited through the Alaskan Bering Sea snow crab season which could underpin the markets.


the garden


The avocado markets continue to track well below year ago levels. After the harvest stoppage in Mexico earlier this fall, production has resumed to normal levels which is putting pressure on avocado prices. The downside risk from here in the avocado markets is likely minimal, however. Harvest stoppage concerns could underpin prices at times next year. The overall lettuce supply remains limited. Romaine demand is starting to improve but it remains subpar. The greater risk in the lettuce markets is to the downside.


The kitchen sink


Higher domestic butter prices are supporting U.S. imports. During October, U.S. butter imports were up 81.9% compared to the prior year and were the largest for any month since June 2014. In October, butter exports were 75% more than the prior year and best since June 2015. Still, the U.S. was a net importer by 1.9 million pounds during the month. History hints that lower butter markets will materialize for the reminder of the year. The cheese markets remain weak due in part to high stocks. But, the downside price risk from here for cheese is likely limited due in part to export demand.


The wheat markets have been on the defensive in recent weeks as Russia continues to export strong volumes and the domestic 2019-20 crop generally improves. Speculation that Russia will limit its wheat exports this summer has generally dampened. But if they do, it could be supportive of the various wheat markets.




The EIA’s most recent weekly national average retail diesel fuel (ultra-low) price was $3.161 per gallon, the cheapest since April but still up 8.6% from a year ago. History suggests that diesel fuel prices could fall for the remainder of December.