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THE FARM

Poultry

For the week ending January 25th, young chicken slaughter moved 5.1% over the year prior, but persistently heavier bird weights pushed RTC production 7.5% over year ago levels. Elevated production schedules have tempered much of the upside across the wholesale chicken market, but breast meat prices look to have finally minted a low. Upside is expected into spring/summer grilling season. The wing market has, as well, struggled and is nearing the timeframe typically noted for a peak in wing prices. But March Madness feature activity is just around the corner which could temper any near-term price downside. Chicken leg quarters prices may find support this spring.

Beef

Beef production remained strong last week, up 8% from last year. But it looks like packers may be pulling cattle ahead as forward cattle supplies are starting to thin. This could temper beef output gains in the near term. The January 1st Cattle Inventory Report signals that year-over-year gains in beef production should tighten modestly into late 2020. Currently, the Choice cutout is sliding from a mid-January peak, but interest is expected to reemerge in mid-February. The move higher will likely be supported by not only the middle meats but the trim and grind complex as well, including beef 50’s.

Pork

Pork production last week was up 15% from 2019 but is being compared against a winter weather hampered production week. Strong pork production as well as uncertainties surrounding the coronavirus continues to pressure the markets. But history suggests that many of the markets could find support soon. Pork bellies have retreated from their $1.15 mid-January price points, falling back below the $1.00 mark. We continue to view exports as a risk to the markets deeper into 2020 as China remains short protein supplies.

THE SEA

Seafood

Expensive snow crab prices continue. The Alaskan fishing season is progressing and is expected to continue into the spring due in part to the 23% increase in the quota. Canadian fishing should get underway next month with the bulk of the harvest starting during the late spring. World snow crab supplies are expected to be up slightly in 2020 but still the second smallest since 2013. High snow crab markets should persist.

THE GARDEN

Produce

The tomato markets are starting to ease. Overall tomato shipments last week fell 8.8% from the prior week but were nearly 14% better than the same week last year. This is due in a large part to better supplies out of Mexico. Tomato supplies are expected to continue to improve in the coming weeks which should bring with it more tomato price relief. The potato markets remain expensive, especially for larger sized product. Potato supplies and quality are anticipated to remain suspect into the summer which generally should be supportive of the potato markets.

THE KITCHEN SINK

Dairy

The cheese markets moved lower this week, but block prices remain inflated. Per the USDA, cheese production in December was only .2% better than the prior year. The cheese block price premium over barrels is historically big, which is usually a pre-cursor to block price declines. The CME spot butter market found some support recently after hitting a 39-month low early last week. U.S. butter output in December was up 4% from 2018. The downside price risk in butter may be limited for the rest of the winter. December 31st nonfat dry milk stocks were down 10.2% from 2018.

Grains

South America has started their harvest, and favorable weather is fueling expectations for large crops. This, better than anticipated domestic crops, and projections for larger corn and soybean plantings in the U.S. this year, suggest that the risk in the feed markets may be to the downside. But better exports could temper any declines.

Oil

Nearby natural gas futures have fallen 16% so far in 2020 due largely to a relatively moderate winter (lack of cold temps). U.S. natural gas stocks as of last week were 23.6% more than a year ago. Still, $1.700 is a big support level for natural gas.