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For the week ending February 16th, chicken output was modestly below the week prior but down more than 1% year-over-year. Disparities remain between the slaughter categories, with small bird production down 3.6% throughout February compared with birds in the heavy weight category (7.75 lbs. and up) averaging .4% over a year ago for the month. After peaking more than 5% above the prior year leading up to the Super Bowl, wing prices have remained firm and above year ago levels. The chicken tender market increases appear to be slowing which isn’t unusual in March, and seasonal declines are likely into early Q2. Chicken breast prices should remain firm.
Last week, beef production fell 3.6% week-to-week but was up just under 1% from last year. As beef packers enter “cooler cleaning season,” production is expected to remain tempered well into March and should support overall beef prices in the process. Seasonal buying is underway for early spring needs, with large sales of ground beef. Plus, growing forward sales of Choice middle meats are being noted. Year-over-year strength in the Choice cutout has faded in recent weeks, but premiums on ribeyes and loins are still occurring in the forward market. Tighter spot beef inventories are anticipated moving deeper into Q1.
Pork production moderated last week, failing to eclipse the 2.5 million head mark but remained 5% over the year prior. Larger production continues to weigh on prices, with bellies suffering substantial losses, leaving the cutout at its lowest since 2009. Lower pork prices continue to encourage exports, but interest from mainland China remains absent. Recent weather-related slowdowns, coupled with increasing export sales may support pork prices through early March. But, additional solid pork output may resume lower price action in Q2.
The salmon filet market has averaged above the prior year levels in recent months. This is despite solid U.S. imports. During November, total U.S. salmon imports were up 4.9% from 2017 while Atlantic salmon filet imports were bigger by 12.9%. Assuming strong imports continue, it could mitigate the upside price risk for salmon this spring.
The lettuce markets are firming. Cool, wet weather has impacted the growing areas in recent weeks causing crop maturation to slow. Iceberg lettuce shipments last week were still strong but are expected to lessen in the coming weeks. This could be supportive of the lettuce markets during the first few weeks of March. U.S. avocado imports from Mexico last week were 17% bigger than the same week last year. Assuming good avocado imports continue, it could dampen any seasonal upward pressure in the markets this spring.
The kitchen sink
The cheese markets remain supported. Cheese block prices are the highest since mid-October. December 31st cheese stocks were up 5% year-over-year and a record for the month. But, it was the largest drawdown in cheese supplies for any December since 1987. History suggests that cheese prices can still appreciate modestly in March. The butter markets continue to be firm. December butter inventories were 6.3% bigger than the previous year and were the largest for the month since 1993. It was the best build for December since 2012. Still, the spot butter market usually rises during the spring.
The wheat markets have moved downward rather sharply in recent weeks. World wheat demand growth is reported to be slowing. However, the world’s largest exporter, Russia, has some of the tightest wheat supplies in the last decade. This could temper any further downside in wheat prices in the near term.
The EIA’s most recent national average retail diesel fuel (ultra-low) price was $3.048/gal., the highest in eight weeks and 1.4% more expensive than a year ago. The U.S. economy continues to be healthy which is supporting diesel fuel demand. History has shown that diesel fuel prices seasonally bottom in February.