The Dish Market Report, October 25, 2018

Top of mind news

The Farm


For the week ending October 13th, chicken output declined 3.8% and was 1.5% less than a year ago. The smaller year-over-year decrease was due mostly to Hurricane Michael’s impact on Georgia’s chicken production, the country’s number one broiler provider. The six-week total of chicken output stands at up only .1% versus 2017. Last week spot margins for producers were the lowest for the week since 2012. If waning profitability persists with a declining number of broiler layers occurring, it’s likely that the chicken markets could experience counter seasonal support. The ARA boneless skinless Chicken Breast Index is the cheapest since at least 2007. This should eventually equal lower retail chicken breast prices and help boost demand.



Last week beef production declined 2% from the previous week and was .7% below a year ago. Despite modestly heavier carcasses from a year ago, output was hampered by smaller than expected slaughter. Given larger feedlot placements this past summer, total on-feed cattle are record large, and front-end supplies are projected to remain ample. The USDA is calling Q4 beef production to be up 2.9% (yoy). Beef demand remains brisk, with the four-week average of forward sales 3.3% better than last year. Choice ribeye and tenderloin prices are running well above a year ago but are expected to seasonally peak in the late fall. The boneless beef trim markets continue to languish near two-year lows.



Pork production last week jumped 4.2% from the prior week and was up 3.9% from last year.  It was the largest weekly hog harvest ever recorded. Despite 2.6 million hogs being slaughtered, lighter year-over-year carcass weights tempered the already historically strong output.  In the coming weeks, plentiful hogs, at heavier weights are expected to boost year-over-year pork production gains. Seasonal holiday ham interests have been modest.  Since 2015, the average move for the 23-27 lb. ham market in the first two weeks of November is up 3.6%.



The Sea


The snow crab leg markets remain elevated.  During August, the U.S. imported 17.1% less snow crab than the previous year due to the tight world supplies.  The 2018-19 Alaska Bering Sea snow crab quota is 50% bigger than last year which should aid supplies some by the spring.  But the higher quota won’t likely be near enough to normalize prices or supplies.



The Garden


The Idaho potato markets have firmed slightly as of late as the fall harvest season nears its final stages.  Early estimates are that the fall U.S. potato harvest could be as much as 5% bigger than last year.  This should temper the seasonal upside risk in potato prices in the coming months.  The five-year average move for the 70-count Idaho potato market from this week through the end of the year is only a 3.9% increase anyways.  Avocado prices continue to track well below year ago levels.  The downside price risk in avocados from here is likely nominal.



The Kitchen Sink


Domestic milk production growth may be showing some early signs of slowing.  During September, milk output in the U.S. rose 1.3% from the previous year despite a .3% reduction of the milk cow herd (yoy).  The milk-per-cow yield was 1.6% better than a year ago.  But, the milk cow herd during the month declined by 12,000 head.  Plus, the USDA revised lower its July and August herd estimates.  This data suggests that forecasted year-over-year milk output gains may be tempered which could limit the seasonal price weakness for cheese and butter which occurs during the late fall.



The domestic winter wheat planting season is progressing.  As of October 21st, 72% of the crop was in the ground.  This compares to the five-year average for the date of 77%.  Soil moisture conditions are improving for winter wheat, and no drought is anticipated into the early winter.  Wheat prices could move lower in the near term.



WTI crude oil futures have fallen sharply over the last week, with the nearby contract achieving the lowest level since August. Global economic growth concerns, especially out of China have increased. But, $66.70 is a key support level for crude oil.