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For the week ending February 29th chicken slaughter was up 4.5% from the year prior and leaves the six-week sum of RTC production 8% larger than 2019. Despite elevated production schedules, breast meat prices have started to rise, up near $0.06 from February, but remain well below the year prior. The wing market has been sliding, seasonally, and the market looks to put in a low ahead of March Madness deliveries. Still, given the ongoing COVID-19 fears, restaurant traffic may be tempered relative to initial expectations and wing demand may fall short of expectations. After falling sharply into late February, the leg quarters rebounded and look to head higher into spring.
The first full week of March notched a 6.6% increase in cattle slaughter but posted a 10% year-over-year jump in total beef production. Larger production continues to weigh heavy on the cutouts, with the Choice cutout 8% below year ago levels. Amid lower beef prices, buyers continue to stockpile product. Over the past couple of weeks’ spot purchases of Choice beef cuts have been robust by longer-term historical standards. Increased buying activity is being led by the middle meats, but the beef 50s have remained active, as well. Anticipate the beef complex to be a buying opportunity heading into the spring.
Pork production last week was up 6.5% from the year prior. Active production schedules continue to weigh on the wholesale pork markets, but exports have been robust per the latest data release. Expect pork exports to support wholesale prices well into the summer, but the upside seasonal price movement has been slow to develop. There’s risk that pork output will begin to slow amid active export interest and prices could be stronger than initial forecasts. Belly sales have been active below the $0.90 mark, but prices have struggled to find some strength.
The salmon filet markets continue to track near year ago levels. Imports have been solid. During January, the U.S. imported 10.4% more salmon than the previous year with trade from Chile higher by 18.9%. Imports from Norway were flat while product from Canada was down 4.8% from 2019. An inflated U.S. dollar and lackluster demand could encourage salmon imports during the next few months. This is likely to keep a lid on the salmon markets. But the price risk later this year could be to the upside.
The avocado markets remain inflated. Consumer demand is reported to be slowing due to the elevated price levels. However, supplies remain limited. Avocado imports from Mexico last week fell 26% from the previous week and were 28.9% less than the same week last year. History suggests that expensive avocado prices could persist during the next several weeks. But the longer-term price risk is to the downside. The total tomato supply in the U.S. last week was 7.9% bigger than a year ago due to better shipments from both Mexico and Florida. Lower tomato prices may be impending.
THE KITCHEN SINK
Since last week cheese block prices are steady but cheese barrel prices are the lowest in a year. U.S. January exports were up .4% year-over-year. Better milk production gains lately mean cheaper cheese production which could influence prices lower in the near term. However, the cheese markets usually bottom during mid to late March. The butter market lost modest ground this past week but is currently up 7.2% from the 59-month low of $1.695 set last month. Domestic butter exports in January were down 22.3% from last year. The spot butter market typically bottoms for the year during February.
The food oil markets continue to soften. Nearby soybean oil futures this week fell to their lowest level since the spring. Food oil prices in China continue to deteriorate due to poor demand which is pulling the global markets downward. Still, history suggests that food oil prices should find support soon.
Nearby WTI crude oil futures are a whopping 37.5% lower in the last 13 business days. The spread of coronavirus and a breakdown in talks between Russia and OPEC regarding production cuts should still be a headwind for crude oil prices.