Freshly Picked, December 12, 2019

top of mind news

THE FARM

Poultry

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Chicken production for the Thanksgiving holiday week, while down significantly from the non-holiday week the year prior, was the largest for that holiday week since at least 2014. Bird weights fell abruptly during November, but the move was largely seasonal. Breast meat prices continue to escalate, but the upside potential is expected to lessen with choppy trade likely from early 2020 into the late winter. Wholesale chicken wing prices continue to search for their seasonal low which usually is established by mid-December. Look for higher wing prices from late December into early February as demand rises ahead of March Madness, as well as the Super Bowl.

Beef

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Following the reopening of the downed Tyson beef operations plant, last week’s cattle harvest jumped to 679k head, 10k head more than the year prior and was the best weekly output since 2011. Seasonally, the USDA boxed beef cutouts are declining, with losses being led from the Choice middle meats. From the late fall into early winter, ground beef prices tend to find support, but given persistently elevated prices since the late summer, sharp downside prices are occurring into mid-December. Still, ground beef prices should find support later this month into mid-January when late winter relief usually occurs.

Pork

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Last week’s slaughter schedule for hogs posted another record, with 2.799 million head moving through packing plants. While some of the increase was due to inclement weather the week prior, more active schedules are still anticipated into the first half of 2020. Pork belly prices continue to languish near the $1.00 mark, but price risk remains to the upside both seasonally, as well as on escalating export expectations. Yet, the USDA did adjust their 2020 export forecast lower from November but is still projected to be up 13% (yoy).

THE SEA

Seafood

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Salmon imports were erratic in October. The world exported 1.3% more salmon to the U.S. than a year ago, setting a new record for the month. However, Atlantic salmon filet imports were down 10.6% due to declines in trade with both Chile (17.7%) and Norway (7.8%). Year-to-date Atlantic salmon filet imports are up 5.6% from 2018 with trade. Better imports could be coming which should temper the upside in salmon prices.

THE GARDEN

Produce

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Tomato supplies have tightened which is supporting the markets. Adverse weather in Mexico is slowing supplies. U. S. imports of tomatoes from Mexico last week fell 7.3% (yoy). Seasonally cooler weather is also slowing the crop development in Florida. Harvest delays over the holidays could keep the tomato markets well supported. However, history suggests that lower tomato prices should be forthcoming in January. The potato shortage remains a major problem for buyers and may continue to underpin potato prices deep into 2020.

THE KITCHEN SINK

Dairy

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The cheese markets this week have fallen, especially barrels, which have lost a whopping 16.4% just this week. U.S. cheese exports in October were 5.5% more than a year ago. Cheese prices have been firmer longer than seasonally typical this fall, but history hints that further downside potential is likely from now until January. Spot butter prices this past week were the lowest in three years. October domestic butter exports were down 62.4% (yoy) which isn’t a surprise considering global butter prices are at a significant discount. Since 2015, spot butter prices averaged 3.7% lower in December versus November.

Grains

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The food oil markets have continued to trade above year ago levels due in part to short supplies in China and growing world biodiesel use. World palm oil prices have risen to their most expensive level since the winter of 2017, with November 30th Malaysian stocks down 36% from the prior year. Food oil prices may have more upside.

Oil

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Diesel fuel futures have risen since last week. For the week ending November 29th total U.S. diesel fuel stocks were 11% less than the five-year average for the week. Retail diesel fuel prices may garner support but are still down 3.5% from a year ago.

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