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For the week ending January 30th, chicken harvests were down 3.1% (y/y), despite initial estimates of a more modest 1.1% decline. Bird weights remain record heavy which left ready-to-cook broiler production down 2% from a year ago. While chicken production has been persistently smaller since last May, active buying interest has been mostly absent until recently. Still, it appears that breast meat, tenders, and dark meat prices are all moderating from their recent runs higher, but the wing markets remain firm. Still, look for a modest price pull back on the wings following the Super Bowl. But it is likely going to take larger production to break the upward price trend for wings. Moderating prices are expected for the other chicken parts however in the near-term.
Last week’s cattle harvest was estimated at 653k head, steady week-to-week but was 3.5% larger than last year. Beef production continues to run heavy, up 5.4% last week (y/y). Larger beef output has apparently been unable to keep up with immediate demand needs as the Choice cutout tacked on another $0.05 (w/w), with the middle meats leading the way. Of the Choice primals, only the brisket was lower (w/w). The trim and grinds markets faded throughout last week, with the beef 50s falling back in to the $0.50 area, about 7% under a year ago. Imported lean beef trim prices are on the rise, and additional upside risk is likely.
Last week’s hog throughput, while larger than expected, may have been hampered by the weekend’s winter weather. Early estimates put pork production last week at 3.2% more than a year ago, and the weekly average USDA pork cutout value declined modestly week to week. Still, at $0.841, the pork cutout is 30% higher than a year ago. Amid higher wholesale pork prices, weekly spot sales volumes have been sliding since the start of 2021. Ham and belly prices remain volatile but expect modest downside potential across the belly primal into later this month.
The salmon markets firmed during the early winter despite solid imports. During December, the U.S. imported 5.6% more salmon than the previous year. Salmon demand, although notably impacted by slack foodservice sales, has fared better than many other seafood products due to home consumption. The risk in the salmon markets for later this year is higher if foodservice demand improves.
The tomato markets continue to decline as the harvests improve. Tomato shipments from Florida have risen rather sharply in recent weeks and forecasted warmer temperatures should help their crops in the near term. Supplies from Mexico have been strong as well. History suggests that the tomato markets could find a bottom during the next week or so before moving modestly higher. The potato markets continue to trade at engaging levels well below the same week last year. Potato stocks are historically adequate as demand remains lackluster.
THE KITCHEN SINK
The spot cheese markets were mostly steady to slightly higher last week. U.S. December cheese stocks were up 5.7% (y/y) and grew by 3.8% from November. Solid cheese exports may temper further price declines that have been experienced so far this year. Spot butter prices finished modestly lower last week. Domestic butter inventories on December 31st were up 44.4% (y/y). Challenged fine dining food service has caused spot butter prices to be the lowest in 12 years. Yet, December butter exports were up 155.2% (y/y). Strong exports and improving demand hints that the lower price risk for butter is small.
The corn and soybean meal markets remain elevated. Spot feed costs for chicken producers last week climbed to their most expensive level since the late summer of 2014. Yet, more supplies are anticipated to be available in the coming weeks as the South American harvest builds. This could temper any further upside in the grain markets.
Last week nearby WTI crude oil futures finished up 8.9% (w/w) and were the highest in 13 months. Projected additional financial stimulus by the U.S. government plus improving economic activity will likely keep crude oil prices firm.