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Chicken slaughter for the week ending November 7th, at 170 million head, was the largest week since late September but was still 1.4% less than a year ago. Bird weights are declining seasonally, which left ready-to-cook (RTC) production across the prior six weeks being 2.5% below last year. Leg quarter prices have finally found some strength, as a pair of relatively large spot purchases made last week were the catalysts to those price gains which may persist in the near-term. Wing prices remain strong, moving into the upper $2.20’s late last week. Still, anticipate softer wing prices into early winter but tighter production this year may make those typical seasonal drops less intense.
Cattle slaughter, at 653k head last week was 1.5% smaller (y/y), but total beef output was a modest 0.1% back of last year. Carcass weights look to be nearing a seasonal peak and heavier spreads to a year ago are likely to narrow into 2021. The USDA Choice cutout continued to head higher throughout last week, but a seasonal top may be near with the middle meats (mostly the ribs) leading the losses. The end meats remain firm, however, and may limit cutout losses into the late fall. Fat trim prices edged back over the $0.40-mark last week, and modest upside is likely. Domestic 90s, also notched modest gains with further upside expected.
Last week’s expected 2.7 million head harvest was dashed with the industry only moving 2.68 million head through packing plants. Hog slaughter may continue to run 1% to 3% below year ago rates in the near term. During last week, the ham and belly primals posted losses, especially for the pork belly complex. Spot belly prices are now under a $1.00/lb. and may be a good contracting chance. Trim prices are backing off, with the 42s dropping back below year ago levels. But seasonally sideways trim pricing may occur before firming in to early 2021.
The snow crab markets continue to trade at elevated levels despite subpar foodservice demand and solid imports in recent months. During September, U.S. snow crab imports were 86% bigger than the previous year. The Alaskan Bering Sea snow crab fishing season is underway, but the bulk of the landings are not anticipated until January. Inflatesnow crab prices should persist.
Hurricane Eta took aim at the bulk of the producer growing areas in the Southeast last week bringing notable rain and high winds. Not ideal for the crops for sure. Most vegetable crops including tomatoes, peppers, and green beans were impacted which is bringing support to the markets. Tomato supplies could be especially erratic over the next few weeks which could be accompanied with inflated price levels. Lettuce supplies remain limited as well although some improvement is anticipated during December.
THE KITCHEN SINK
CME cheese block and barrel prices have falling markedly lower. Robust milk supplies, smaller food box dairy commitments and tempered food service cheese demand are all influencing prices downward. Cheese price declines are occurring so rapidly that dairy farmer margins are now coming under pressure. This may bring some support to cheese prices soon. CME spot butter prices remain historically low. Readily available cream supplies are boosting butter output and increasing stocks. Although the downside risk for butter is likely limited, price gains may be tough until food service demand recovers.
The USDA adjusted their 2020-21 U.S. corn and soybean output estimates lower last week as well as cut Argentine production. Consequently, the available U.S. soybean and corn supply is projected to be the smallest in seven years. This should underpin corn and soybean prices during the fall.
After hitting the lowest level since May earlier this month, nearby WTI crude oil futures have risen 23.7% (since then). Despite some economic growth concerns due to covid-19, OPEC has cut crude oil output. Price resistance is at $43.75/bbl.