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Weekly chicken harvests continue to accelerate, with slaughter for the week ending October 5th reportedly 4.7% larger than last year. Bird weights typically peak in mid-October, but year-over-year increases are expected to persist, leaving RTC production well above a year ago. The larger production schedules continue to pressure chicken prices, leaving breast meat at the lowest price this time of year in more than two decades, but the wing markets continue to remain firm. However, look for wing prices to trend downward from late-October into year’s end, but sharply higher prices usually occur leading up to the Super Bowl and the NCAA March Madness tournaments.
Although coming in over the week prior, beef production last week was down 1.2% year-over-year, a common trend in recent weeks. Packers appear content to produce beef at a slower rate from last year, with margins being ample and cattle inventories manageable. The Choice boxed-beef market is seasonally rising and should continue to increase into November before trending sideways (as usual) into year’s end. The beef 50s prices are attractive here, but seasonal upside potential is expected over the coming weeks. Ribs, as well, will likely be rising sharply from here into late-November before peaking and heading lower.
Despite pork production being revised downward from last week, Monday’s hog harvest made up the difference and set a new single day record for output. Last week’s 9.2% year-over-year increase for pork output is expected to keep the market well supplied, but escalating exports could underpin prices despite the expanding supplies. Upside price risk for the bellies is present, especially after seeing forward sales continue to be bought at premiums to the prevailing spot market. Ham prices, as well, are likely to escalate in response to holiday demand.
The snow crab markets remain expensive. This is despite solid snow crab imports. In August, the U.S. imported 3% more snow crab than prior year. The Alaskan Bering Sea snow crab fishing season is underway. The 2019-20 quota is set at 34 million pounds, up 24% from the previous season and the largest in five years. Still, world snow crab supplies could remain limited deep into 2020 which should temper any price downside.
Lettuce prices remain inflated. Some lettuce is being pulled early as farmers attempt to take advantage of the expensive markets. This could temper the upside price risk in the near term but lengthen the subpar supply situation. The chief lettuce harvest area continues to transition to Huron, California and will shift again to the Imperial Valley in the coming weeks. The avocado markets are relatively steady. Expectations are that avocado supplies should remain adequate throughout the fall which should mitigate pending avocado prices.
THE KITCHEN SINK
The cheese markets remain high with both block and barrel prices being above $2.00/lb., the first such occurrence since November 2014. Spot butter prices found modest support since last week after flirting with hitting $2.00/lb. Per the USDA, Q4 milk production is expected to be .7% better than last year. And, Q1 2020 milk output is forecasted to be 2% more than 2019 which would be the best year-over-year gain for any quarter since 2016. Better milk supplies and expectations of lackluster exports should influence cheese prices lower in the coming weeks. Butter prices can still seasonally fade as well.
World palm oil prices continue to be at a significant discount to soybean oil. Various countries are attempting to limit palm oil use due to deforestation issues with increased palm oil output. This could swing more demand to soybean oil during the next several months. That said, the upside price potential for soybean oil may be limited.
Nearby natural gas futures are up from last week. Per the EIA, total U.S. natural gas stocks (as of 10/4) were .3% smaller than the five-year average for the date. Since 2014, natural gas prices averaged 4.6% higher in November versus October.