The Dish Market Report, November 21, 2018

Top of mind News

Special Situation Red Alert

ATTENTION: CDC ISSUES WARNING RELATED TO ROMAINE LETTUCE

This afternoon the Centers for Disease Control and Prevention (CDC) issued a warning to discontinue the use of Romaine lettuce in any form. Their advice is to not use, sell, or consume Romaine lettuce from any source in any form. Romaine lettuce has been associated with an ongoing outbreak of Shiga Toxin producing Escherichia coli 0157:H7. This is breaking news in the U.S. and Canada.

CDC is advising that U.S. consumers not eat any Romaine lettuce, and retailers and restaurants not serve or sell any Romaine lettuce in any form, until we learn more about the outbreak.
This outbreak investigation is ongoing and the advice will be updated as more information is available.

The cold, harsh reality of foodborne illness and preventing its spread

The Farm

Poultry

Chicken production for the week ending November 10th was down 0.1% from the prior week but was up 2.3% year over year. As producer margins dwindle, chick placements have eased, leaving expectations for production heading into late 2018 to early 2019 down as much as three percent. Larger production coupled with increasing outputs of competing meats has pressured chicken prices, leaving wholesale prices languishing near multi-year lows. Depressed chicken prices remain attractive opportunities heading into 2019 and, although recent history suggests that prices can still drop through year’s end, these low prices should boost demand.

Beef

Despite cattle slaughter coming in 1,000 head over the week prior and even with the same week a year ago, beef production was reduced modestly on lighter carcass weights. Slightly lower beef production is expected to support the cutouts into late November, but as wholesale interest fades on the middle meats (but retail features ramp up), the cutout is expected to ease into December. Spot beef sales continue to struggle, down 13 percent year-over-year across the past four weeks. Additionally, forward-22-and-up beef sales are down eight percent across the past four weeks and may portend larger product available to the spot market, further dragging on the cutouts.

Pork

Last week, pork production was record large, at 555.2 million pounds, up 5.4% year-over-year, despite carcass weights running two pounds below last year. Strong year-over-year gains in pork output are anticipated this winter, with USDA forecasting Q1 2019 pork production to be up 3.1%. This could limit any seasonal upside in the pork markets. The loin primal, which represents the largest portion of the carcass, is at historic lows and may have another week to two weeks of weakness, continuing to weigh on the cutouts.

The Sea

Seafood

The shrimp markets continue to trade well below year ago levels due in a large part to strong imports. During September, the U.S. imported 5.5% more shrimp than in 2017. Also dampening shrimp prices has been low wholesale and retail competitive protein prices including chicken. This factor is expected to persist which could temper the upside in shrimp for 2019.

The Garden

Produce

Avocado supplies have been especially tight in recent weeks due to harvest interruptions in Mexico. For the week ending November 14th, U.S. avocado imports from Mexico fell 70% from the previous week and were down 83% from the same week last year. The work stoppage is reported to have ended which should cause avocado supplies to improve in the coming weeks. Lower avocado prices are likely pending. The tomato markets could be somewhat erratic during the next few weeks as the chief harvest area shifts south in Florida.

The kitchen sink

Dairy

The CME cheese markets have continued to trade at historically engaging levels for buyers. The premium in cheese blocks to barrels has narrowed considerably in recent weeks. Low retail prices are playing a part in boosting cheese barrel demand. The average American cheese retail price in October was the lowest for the month in nine years. However, overall American cheese demand could be erratic in the coming months which could cause the discount in cheese barrels to blocks to widen. The CME butter market usually peaks in early December and then heads sharply lower.

Grains

Food oil prices have been on the decline as of late. Last week nearby soybean oil futures traded at their least expensive level since September. World palm oil prices have been on the decline as well. Soybean oil prices in the U.S. are expected to find support in the not-so-distant future.

Oil

Crude oil prices have fallen sharply since the beginning of October, down 28.8%. Building world and U.S. production, as well as concerns around the global economy, have weighed on prices. Lower retail gasoline and diesel prices are expected in the coming weeks.