Top of Mind News
Chicken production for the week ending September 29th rose 5.1% from the prior week and was 2.4% larger than last year. The six-week moving average for chicken output is tracking 1.5% above 2017. Chicken production is expected to trend modestly above 2017 levels during the next few months. But, last week the producer feed cost ratio was the worst for the week since 2012. If profitability continues to fade, it may temper the expected chicken output gains and eventually support prices. The chicken wing markets showed only some strength this fall and may have already seasonal topped. Since 2013, the average move for the ARA Chicken Wing Index average from now through December was down 10.2%. History says breast prices can still decline.
Beef production last week fell .7% but was 1.4% more than the same week last year. Solid year-over-year gains in beef output are anticipated this fall, but wet feedlot operations could equal lighter cattle weights. This factor could support the beef markets later this month. Beef imports during August were 3.3% smaller than the previous year but the biggest for the month since 2004. August beef exports were a whopping 9.3% better than last year and were a record for any month. The U.S. was a net importer of beef by only 533 thousand pounds. If beef imports continue to be only modest moving forward, it could temper seasonal declines for the lean beef trim markets that usually occurs during the fall.
Pork output last week declined 2.1% and was down 1.5% compared to the same week a year ago. Hog supplies have tightened due in part to some weather challenges and limited transportation. Still, big year-over-year expansion in pork production is expected to occur this fall which could weigh heavy on the pork markets. Pork belly prices have increased notably over the last six weeks when they were setting a 39-month low. However, U.S. belly stocks are large. The pork belly cutout typically falls near 20% from now through the end of the year.
The 2018-19 Alaskan Bering Sea snow crab quota has been set at 27.58 million pounds – up 35% from the prior year and the biggest since 2015-16. However, the quota is still historically small. The bulk of the Alaskan snow crab supply could be available until the winter, but dampening demand is expected to temper snow crab prices during the fall.
The lettuce markets have eased during the last week as supplies are becoming more available. The chief lettuce harvest area will begin transitioning southward to Huron, California area later this month and then shifting to the Yuma, Arizona region during the first few weeks of November. These production shifts can bring some volatility to the markets, but no major supply gaps are anticipated at this time. The tomato harvests are also in the process of transitioning south on both the east and west coasts. Some modest supply gaps could occur.
The Kitchen Sink
Declining international prices are tempering U.S. exports. During August, U.S. cheese exports were 6.6% less than the same month last year. Lackluster cheese exports could persist this fall. This factor and adequate domestic cheese supplies are anticipated to limit any further upside price moves in cheese. U.S. butter imports in August were up 41% from 2017 and the second highest for any month on record. Butter exports during the month were up 49.1% from last year. The total butter supply in the U.S. during August was up 3.3%. The upside price risk in butter is likely limited as well.
The U.S. corn and wheat harvests have slowed due to heavy precipitation in the Midwest. This has brought modest support to the grain markets as of late. However, as the harvest resumes, it could put more downward pressure on prices. Early harvest reviews suggest record corn and soybean yields.
The crude oil and petroleum markets remain the strongest within the broad commodity landscape. A strong U.S. economy and rising geopolitical forces in the Middle East are increasing volatility. But, crude oil prices usually drop during the fall.