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Chicken slaughter looks to be turning a corner, with last week’s throughput estimated up 1.8% (y/y) while the week prior was reportedly 1.3% over year ago levels. While we have indicated that recent placement data is not portending additional chicks available, the past couple of weeks have seen slaughter run more than 5% above what the chick placement data would suggest is available, so do not be surprised to see this trend continue. Chicken prices were mostly firm throughout last week, and reports remain that both retail and food service interest is active. Even export demand has picked up and dark meat clearing the wholesale market is occurring as well. Broiler price increases may be tempered some moving forward, but not until chicken production picks back up!
Last week’s cattle harvest was a bit smaller than expectations, but the 647k head harvested was sill larger than a year ago and pushed beef production 1.8% over last year. The USDA beef cutouts continued to fade throughout last week and the downside across the Choice cutout was more abrupt than that of Select. Choice ribs saw the largest losses throughout the week, but weakness was also noted well across the end meats, as well. The beef 50s are struggling to hold any upside momentum fading towards the lower $0.40’s area. Imported beef 90’s, also remain weak, as reported buying interest is smaller than anticipated.
Pork output last week remained lackluster, falling 1.3% below year ago levels. Take note that current market hog availabilities are likely limited following last year’s sow herd liquidation, but given the sharp rise in sow prices, look for a rebound on hog availabilities into the back half of the year. Still, the USDA pork cutout is approaching the $1.00 mark, with hams and bellies continuing to lead the price support. Given smaller cold storage stocks, some of those price increases may be attributed to the rebuilding of supplies even amid higher prices.
Despite relatively attractive wholesale price levels, retail seafood price inflation continued in February up .1% from the previous month and up 4% from the prior year. Further, the average retail price for fresh fish and seafood in February was a record high. This could dampen retail demand for seafood in the near term. However, better foodservice demand should underpin prices.
The avocado markets continue to firm. Supplies from Mexico have tightened considerably during the last few weeks and demand is starting to improve as foodservice activity slowly recovers. History suggests that the risk in the markets is still to the upside during the next several months. The five-year average move for the Hass 48 count avocado market from early March into August is an increase of 42%. Foodservice demand for produce items is anticipated to build considerably during the back half of 2021.
THE KITCHEN SINK
CME spot butter prices last week were up (w/w) and finished the highest since July. CME cheese block and barrel prices appreciated last week and were the highest in eight weeks. Several U.S. spot milk purchases last week occurred flat versus government grade for the first time in 2021 and signals improved demand. The USDA is forecasting Q2 domestic milk output to be up 3.6% (y/y) which will boost cheese and butter production. Still, strong exports and rising restaurant activity will likely keep the cheese and butter markets supported in the near term. Class II butterfat prices typically rise during the spring.
The corn and soybean markets remain historically expensive. The South American harvests remain behind and challenged. Expectations are that the USDA could lower their harvest estimates for that region in the coming months. But more attention will turn to the pending U.S. crops shortly. Erratic corn and soybean prices may continue.
Nearby RBOB gasoline futures last week were sharply higher (w/w) and hit the highest level since July 2018. Improving economic activity and anticipation of increased travel activity for the upcoming spring may keep gasoline prices firm.