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Chicken slaughter for the week ending December 12th, at 165.8 million head, was 0.9% smaller than a year ago – the lightest non-holiday (y/y) weekly difference since early May. Ready-to-cook chicken output in the past six-weeks narrowed to just 0.9% below a year ago but is considerably more comparable to year ago levels relative to the 3% to 4% declines noted throughout October. Wing prices remain firm and the leg quarter markets have started to edge higher. Breasts and tender prices have started to weaken (seasonally), but upside potential exists into the late winter and spring. Higher feed costs may temper some of the upside risk, however, and chicken integrators are not likely to increase production as rapidly as would have been hoped for.
Another active Saturday slaughter kept the weekly cattle harvest aggressive, but throughput was slightly smaller than initial expectations. Still, at 553.5 million pounds, beef output was 0.3% larger than last year. The USDA boxed beef cutouts have faded into late December, but two consecutive weeks of holiday reduced harvests will likely underpin beef prices. The beef 50s are struggling in the low $0.30s while domestic 90s remain in the lower $2.00 area. Yet, there may be upside risk the 90s going into the new year, but price weakness for 50s is likely to continue lacking an increase in foodservice demand into 2021.
Pork processors last week posted a new record for pork output, at 611.3 million pounds, 1.1% larger than a year ago. Heavier hogs remain the key to the increased production and are weighing on the pork 42s prices. But, languishing in the lower $0.20s, the 42s look to be near a seasonal low with upside potential usually well into the summer. Belly prices, as well look attractive in the upper $0.80s and higher prices may be forthcoming in 2021 as a slug of export sales, including to non-customary top Asian destinations who are now seeking product.
The snow crab markets remain inflated due to the tight world supplies. Despite this, U.S. snow crab imports have been solid. Snow crab imports during October were 33% larger than the previous year. The Alaskan Bering Sea snow crab fishing season is progressing with most of the production anticipated during the next several months. Still, fairly inflated snow crab prices could persist.
The Idaho potato markets remain steady to soft tracking well below year ago levels. December 1st U.S. potato stocks were .8% above year ago levels but the second smallest for the date since 2015. Total russet potato supplies, however, were down 2.1% from the previous year, with Idaho russets down 4.4% and Washington russets down 12.5%. History suggests that the risk in the potato markets is to the upside in the coming months, but slack foodservice demand could temper any pending price increases. The avocado markets are depressed.
THE KITCHEN SINK
CME cheese block and barrel prices were up modestly last week but are down at least 10% (y/y). CME spot butter prices finished lower last week and are cheaper by 27% (y/y). Per the USDA, U.S. November milk production was up 3.0% (y/y). The number of milk cows in November was up 0.7% (y/y) and have grown a whopping 46k head this fall. The milk-per-cow yield in the month was up 2.2% (y/y). Expect big milk output this winter but if dairy farmer margins continue to decline, cow numbers may fade in 2021. The downside risk for cheese block prices may be nominal. The same is true for butter prices.
The food oil markets continue to firm with both soybean oil and palm oil prices reaching multi-year highs. Russian recently increased tariffs on sunflower oil exports which is further tightening and already limited world food oil supply. The food oil markets are expected to remain volatile into the winter.
After hitting the lowest level since September this month, nearby natural gas futures have risen 4.2% in the last two weeks. Total U.S. natural gas stocks (a/o 12/11) were up 8% (y/y). This factor should temper any big price gains this winter.