Business Insights

February Market Insights

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General Comments

USDA’s monthly cattle on-feed report released Friday showed the number of cattle in U.S. feed yards with a capacity of 1,000 or more head as of Jan. 1 at 8.3% above a year ago and 0.6 percentage points above the average of analysts’ estimates. Placements in December were reported at 100.8% of a year ago, compared with the average guess of 96.9%. Placements are the number of cattle put in feedlots in preparation to go to slaughter. The report is slightly bearish for a 4-6 month time frame since placements were nearly 4% above the average of the expectations.

The weekly federally inspected slaughter was assessed at 588,000 head. Winter storm conditions last Monday shuttered plants, and a couple of major plants closed on Friday for maintenance. Last week’s harvest tallied 615,000 head. Live cattle weights were unchanged at 1383 pounds. Dressed carcass weights declined by 2 pounds to 836 pounds. The cash cattle market surged higher last week, reaching $127. This is the highest level since June 2017. Usually, the beef cutout has a seasonal decline in February. However despite beef production YTD being up 3.2%, this year is giving indications on multiple fronts that the Q1 cutout low was established in January near $205. Thoughts are that January will show another record for beef exports. This, accompanied by exceptionally strong demand for grinds and muscle cuts to grind, is supporting prices.

LOINS, RIBS, CHUCKS, THIN MEATS, ROUNDS & GRINDS

LOINS

Top Butts: Choice Butts marched higher on solid demand and tighter supplies. Selects moved higher early last week, but retreated by week’s end. Other than a potential dip in early February, Butts usually rally from now until April. Short Term: Steady- rm pricing.

Strips: Choice prices were steady last week while Selects experienced gains on price-point demand. Typically, strips see a dip in price from now until mid-February before beginning a 3-month significant rally. Look to take advantage of any weakness in the next couple of weeks. Short Term: Softer for a couple weeks, then much stronger pricing.

Tenderloins: Tenderloins were steady with a softer tone. Similar to the Strips, look for some additional weakness through early to mid- February when Tenderloins typically bottom. The overall trend is lower, but current price levels look attractive to many buyers. Short Term: Steady to lower pricing, then much stronger pricing as we get into March.

Tri-Tips: Both Choice and Select prices bounced back higher last week as supplier inventory has tightened up. Demand is solid. Prices typically rally from now until April. Short Term: Steady to higher pricing.

RIBS

Ribeyes: Ribeyes, both Choice and Select, continued higher last week. Look for prices to continue their price rise through March. Short-Term: Steady to higher pricing.

BEEF

CHUCKS

Chuck Rolls: Chuck rolls accelerate higher with supplies being well short of demand. Cold weather has reduced supplies and increased demand. Expectations are for this market to put in a seasonal top and migrate lower. Short Term: Steady to weaker pricing.

Teres Majors: Prices continue their rise. Demand is outpacing supply and the market is adjusting accordingly. Typically, prices rally from now until May. Short-Term: Steady to higher pricing.

Briskets: Briskets moved higher last week with Selects outperforming Choice. Buyers may be starting to procure their St. Patrick’s Day needs. Short Term: Neutral to rm pricing.

THIN MEATS

Ball Tips: Ball tip pricing moved higher last week as supplies were insu cient for a solid demand. Ball Tips typically move higher from now until late March on consumers altering their preferences. Short Term: Neutral to rm pricing.

Flap Meat: Prices chopped sideways last week with no signi cant gains in either direction. Seasonally, Flap meat pricing is softer the week or so and then experiences a sizeable rally until May. Increasing supplies may temper the market from any significant rallies. Short Term: Steady to rm pricing.

Skirt Meat: Skirt meat adjusted higher as weather-affected production is keeping supplies short of demand. Expect prices to remain about steady to slightly higher due to limited supplies. Short Term: Steady pricing.

Flank: Flanks continued higher last week with Select outperforming Choice. Flanks are a preference for consumers this time of year. Short Term: Steady to rm pricing.

ROUNDS

Peeled Knuckles: Knuckle prices continued higher last week with Select outperforming Choice. Choice, priced below the Select, is now a good value. The post-holiday decline sparked some buying interest and cold weather has put the supply out of balance with demand. Expectations are for prices to move lower in the next few weeks. Term: Neutral to lower pricing.

Inside Rounds: Rounds continued to move higher last week with Select experiencing greater gains. Choice, priced under Select, o ers great value. Prices typically move lower in late-January and rally in late-February. Short Term: Mixed pricing.

Bottom Round Flats: Choice prices were higher early last week on a supply shortage, but retraced most of their gains. Selects migrated lower. Short Term: Neutral to softer pricing.

Eye of Rounds: Prices jumped higher in early week trade, but rescinded most of its gains by Thursday. The market for Most likely, Eyes may have put in their seasonal top. Expectations are for continued declines until April. Short Term: Neutral to lower pricing.

GRINDS

Fresh 50s may have a cape and an “S” on their chest as they go “up, up, and away”. Cold weather and storms have increased demand and reduced availability of supplies. This trend may continue for a couple of weeks. Fresh 90s fell lower, giving back most of the previous week’s gains; however, the trend is up. With the exception of a lull in February, prices typically rally from now until summer; supplies should be increasing however. Short Term: Steady to rm on both 50’s and 90s.

POULTRY General Comments

Broiler-Type Eggs Set in the United States Up 2 Percent – Hatcheries in the United States weekly program set 225 million eggs in incubators during the week ending January 27, 2018, up 2 percent from a year ago.

POULTRY

Broiler-Type Chicks Placed in the United States Up 1 Percent – Broiler growers in the United States weekly program placed 181 million chicks for meat production during the week ending January 27, 2018, up 1 percent from a year ago. Cumulative placements from the week ending January 6, 2018 through January 27, 2018 for the United States were 729 million. Cumulative placements were up 2 percent from the same period a year earlier.

Year-to-date production has been a little less than last year probably due to weather-related plant downtime. Prices have rmed on a number of items as a result.

WOGS

Whole birds and WOGS were about steady to slightly lower on the week. Seasonally, prices rally this time of year; however, supplies are more than ample and should cap any signi cant rallies. Short-Term: Steady pricing.

BREAST MEAT & TENDERLOINS

Jumbo breast meat was steady with a rm undertone last week as supplies are pretty well cleaned up. Medium breast meat and tenders are tight with prices advancing. Demand has been great. QSR features are providing support. Short-Term: Neutral- rm pricing.

WINGS

Prices continue to be moving slightly higher on Super Bowl purchasing. Fresh wing supplies are tight. Once the big game is behind us, expectations are for a seasonal top and lower pricing in the coming weeks. Short-Term: Steady followed by weaker pricing.

THIGHS

Export demand for leg quarters is very good and frozen inventories are low. Poultry plants continue to struggle with un lled job positions. Given good demand for leg quarters, the thigh deboning line is one of the rst to slow down when crewing is sparse. Thigh meat prices are up as supplies get tighter. Short-Term: Steady pricing.

TURKEY WHOLE BIRDS

December’s cold storage report revealed that frozen hen turkeys were cleaned up pretty well. This could embolden retailers to buy more while prices are low. Short-Term: Steady pricing.

TURKEY BREAST MEAT

Prices were steady last week. With prices at 10-year lows, it would be prudent for a buy to jump in the market to handle any foreseen needs. Short-Term: Steady pricing.

PORK

Total pork production for the week ending January 27, 2018 was estimated at 506.9 million lbs. This was 1.6 percent over the previous week, and .5 percent higher than last year. Average live weights, at 286 pounds, were a pound higher than last week and last year. This continued expansion of production should keep a lid on any signi cant rallies.

The USDA is forecasting 2018 pork output to be 5.4% better than 2017. This should be adequate to meet U.S and abroad pork demand. Bacon demand remains strong as well, but better inventories are in place this year. Typically, the belly market peaks soon, but not much has been typical about the belly market the last couple of years. Ham prices are 20% higher than 4 weeks ago, but should see continued support from Easter purchasing. Ribs are being bought and put in freezer programs. Loins are struggling with competing proteins.

LOINS

Pork loins were lower last week as they face sti competition from chicken and ground beef features. Prices typically move higher from now until mid-March, but supplies are increasing as plant capacity continues to grow. Short Term: Steady pricing.

TENDERS

Prices were choppy last week, but ended lower. Demand has been poor. Seasonally, pork tenderloins see pricing strength through early February as retail activity for Valentine’s Day picks up. Short Term: Neutral to rm pricing.

BUTTS

Butt prices are moving lower and expect this trend to continue the next couple of weeks until mid-February. This is when many buyers step in to buy for freezer inventory programs. Short Term: Steady to weaker pricing.

BELLY

Bellies moved higher again last week. Seasonally, prices rally through February and then pause in March. Fresh supplies are tight. Short- Term: Firm pricing.

RIBS

The rib complex was higher across the board last week with Spareribs experiencing greater gains than Backribs. Packers are busy packing frozen ribs against large contract commitments. Availability of smaller-sized ribs is also becoming extremely tight. Expect this trend to continue for at least the next few months. Short Term: Steady- rm pricing.

HAMS

Ham prices rescinded some of its recent price increases and were lower last week. Exports also provide support. The trend higher should continue as we approach Easter purchasing; however, supplies are increasing. Short Term: Steady to soft pricing.

Dairy

BUTTER

Butter production is active as there is an abundance of cream available. However, some producers would be happy to sell off a few loads of cream to take the pressure off . In the Central region some managers were forced to cut back on production due to a snowstorm early in the week. Inventories are steady as manufacturers are building up supplies for spring. Retail butter sales are mixed as sales remain strong. Some contacts report a slight decrease in orders due to the lull in between the winter and spring holidays. The butter market tone is quietto slightly stable. Short Term: Steady Pricing.

CHEESE

Milk is bountiful for cheese manufacturing needs nationwide. Cheese production is generally active, although some plant managers are experiencing seasonal slowdowns and are using the time for plant maintenance. Cheese stocks remain substantial due to heavy milk supplies and heavy production. Cheese spot trading activities are steady to light. Barrel processors in the Midwest report fairly slow orders. Contacts in the West report solid retail sales for cheddar. In anticipation for the Super Bowl, interest for mozzarella is growing. Short Term: Steady pricing.

SHELL EGGS

Shell eggs continued their surge higher as retailers reload for retail features and their foot-tra c war. Prices are up 67% in just 3 weeks. Expectations are for continued support through Easter. Short-Term: Steady to rmer pricing.

MILK & CREAM

Across the country, milk is readily available for processing needs. In the West, milk output is steady to increasing while in the East it
is steady to lower. Due to a recent storm, dairy market participants in the Midwest are facing some challenges hauling milk to the appropriate locations. Bottled milk requests declined in the Midwest, but remained steady in New Mexico and Arizona. Midwestern Class III manufacturers are reducing their already discounted spot loads prices in response to a seasonal slowdown in cheese orders. In the East and West, condensed skim inventories are adequate.

Cream supplies are accessible to all users in the nation. Eastern customers are mainly taking contracted loads. In the West, churning activities are active as manufacturers do their best to clear their cream inventories. Short Term: Steady to lower pricing.

Seafood

SHELLFISH & SHRIMP

Foreign Shrimp: Asian white shrimp are steady with a weak undertone. Supplies are ample for a decent demand. Replacement offerings for large count shrimp are reported limited; overseas buying interest is limited and mostly for immediate needs. 6-8 and larger count black tiger shrimp continue full steady to rm; supplies are tight. The balance of the market is steady. 26-30 count Latin American white shrimp prices are steady- rm. The balance of the market is steady.

Domestic Shrimp (Gulf): Prices are steady- rm across the board. Higher replacement costs and ongoing supply concerns have been supportive. The National Marine Fisheries Service reported their final Gulf of Mexico shrimp landings report for 2017. In December, landings (all species, headless) totaled 6.644 million lbs. compared to 5.848 million in December 2016. This brings the annual total to 100.42 million lbs.; 6.535 million pounds or 6.96 percent above the Jan-Dec 2016 total of 93.88 million lbs. Additionally, Louisiana Wildlife and Fisheries announced the closure of the fall shrimp season in remaining state inside waters and in a portion of state outside waters effective Friday, January 26, 2018.

North American Lobster: The tail market was steady; however, a rm bias is present with growing concerns of future supply. Inventories are held with con dence, and in many instances, are being reserved for contractual obligations. Meanwhile, meat products continue to be discounted. Slower seasonal demand and generally widespread availability continue to weigh on the market. Short Term: Mixed pricing.

Warm Water Lobster Tails: The market continues to be steady- rm. Inventories are considered somewhat limited, especially on larger tails, and all sizes are held with con dence. The market on 9 oz. and larger Caribbean tails are trending higher. The balance was unchanged, but a rm bias persists. Short Term: Steady to higher pricing.

Live Lobster: Supplies for select sizes reported tight in the Mid – Atlantic region. Short Term: Neutral to rm pricing.
Scallops: Scattered premiums were reflected in the market for U.S. origin sea scallops. The seasonal decline in effort and strengthening raw material pricing are price supportive. Short Term: Steady to firmer pricing.

King Crab: The market adjusted slightly lower on 14-17 Russian red crab and lower on 14-17 Russian golden crab. Overall, both the Alaskan and Russian king crab markets are uncertain with volatility; the market is experiencing higher and lower pricing. Short Term: Neutral to softer pricing.

Snow Crab: The Russian Snow Crab market was lower on larger sizes as ample supplies are outpacing a quiet demand. Short Term: Steady- lower pricing.

Crab Meat: The blue swimming crabmeat market adjusted lower again across the board, but may be stabilizing. Replacement offerings overseas have remained steady due to limited raw materials and a slow demand, according to many importers. Current inventory positions in the U.S. vary from seller to seller and the general undertone going forward is mixed. Conversely, the red crab meat market is steady- rm. Shipments of Venezuelan fresh crabmeat to the U.S. are non-existent. Short Term: Mixed pricing.

FINFISH

Salmon: The West Coast whole sh market is rm on all sizes. Supplies continue to be barely adequate and demand is strong. The West Coast fillet market is also rm on 2-3 and 3-4 pound fillets. Supplies are light for an active demand. The Northeast whole fish market
is steady. 14-up sh continue to be the predominant sizes available in the market. 5-6 Norwegian whole fish adjusted higher while the balance of the European whole fish market remained unchanged. Overall, supplies are barely su cient for a decent demand. The Chilean llet market is rm; supplies are barely adequate for a moderate to active demand. The Chilean whole sh market is also rm; supplies are almost short of meeting demand. Short Term: Firm pricing.

Atlantic Cod: Supplies of cod loins have been better recently. The Russian market is seeing shortages due to poor fishing weather and quota reductions. Expectations are for these factors to continue to dominate the market. Raw material is expected to remain rm through the spring of 2018. Short Term: Neutral- rm pricing.

Pacific Cod: After announcements of a massive drop in Alaskan cod stocks, the industry learned last week that Pacific cod catches are likely to drop by 20 percent next year, and the declines could continue for several years. The forecast for raw material remains rm through Spring 2018. Short Term: Firm pricing.

Pollock: This market continues to be firm. Both 1x and 2x frozen blocks are trending higher in price. Supplies have been limited due to poor shing conditions. Start planning accordingly for an early Lenten season. While prices are rming Pollock remains a very viable alternative to cod in terms of quality and relative price. Short Term: Steady to rmer pricing.

Basa: The market continues to adjust higher as tight supplies and higher replacement cost continue to plague the market. Short Term: Neutral to rm pricing.

Catfish: Production of farmed domestic catfish is now seeing some good numbers. Fish have been feeding well with the warm weather and the numbers are improving. Expectations are for continued shortages the next few months and better supplies going forward as the new stocks grow out. The domestic cat sh market is steady; however, the market for larger sized sh and llets is weak. Some discounting has been reported as an attempt to move excess inventories. Imports continue to decline and become more expensive with USDA inspections. Short Term: Neutral pricing.

Whole Fish Tilapia: Supplies for immediate delivery in the spot market are tight due to shortages overseas, as well as ight delays. As a result, trades collected commanded a slight premium. The undertone is full steady at newly listed levels. Short Term: Neutral to rm pricing.

Mahi Mahi Fillets: Supplies are ample and the market is adjusting lower; however, prices are still elevated from last year’s record highs. The undertone is steady. Short Term: Steady to lower pricing with potential for volatility.

Whole Grains and Oils

GRAIN & CROP SUMMARY

Argentina’s parched corn and soybean growing areas will remain dry in the days ahead, forecasters said on Wednesday as farmers calculated yield losses caused by a three-month long drought that was expected to get worse before it gets better. Yield damage to early planted soybeans and corn in the key Pampas farm belt has already been caused by the hot, dry weather with growers hoping that February rains will relieve later-planted elds.

The USDA will release the monthly Oilseeds Crushings report Thursday afternoon at 2:00 PM CT. The average estimate of U.S. wide soybean crush in December is 176.3 million bushels (175.7 to 177.3 million range of ideas) and would re ect total crush for the month 6.0% above the previously-reported NOPA (National Oilseed Processors Association) crush of 166.3 million bushels.

SOYBEAN OIL

U.S. biodiesel production in November was 148 million gallons, essentially unchanged from 146 million in October and continues to run at an extremely steady pace as production in each of the July to November months ranged from 146 to 149 million gallons. November production was up slightly from last year’s 143 million gallons. However, while total biodiesel production was up in November year-over-year, the 591 million pounds of soybean oil used in the month was below last year’s November usage of 596 million pounds, with soybean oil accounting for 52% of total feedstocks used in the month vs. 56% last November and was little-changed from 51% in October.

CANOLA

Canada canola contracts remain stuck within a sideways trading range awaiting a spark that would push values one way or the other. There is a good balance between the competing forces of supply and demand that are holding prices within this range, Demand for canola remains good, while exports may be slowing down, they are still ahead of last year. Looking ahead, Statistics Canada releases a report on stocks as of December 31, 2017 on Monday, February 5th. While that middle-of-the-crop-year stocks report is not that closely followed, it could provide some nearby direction if there are any surprises.

PALM OIL

A wire service survey of various analysts, industry associations and palm oil market participants showed expectations for 2018 palm oil futures to average 2,620 ringgit/ton ($670/ton) vs. current benchmark futures at 2,519 ringgit/tonne ($644), but down from the 2017 average price of 2,807 ringgit/ton. Average expectations for 2018 Indonesian palm oil production were 37.8 million metric tons (MMT) vs. 36.5 MMT last year, with Malaysia production seen at 20.5 MMT vs. 19.9 MMT last year. Malaysian January palm oil/product exports of 1.313 million metric tons (MMT) were down nearly 9% from 1.439 MMT in December, but continue to run solidly better than year ago levels of 1.157 MMT exported in January. Indonesia will leave the crude palm oil export tax at zero in February, the 10th consecutive month without a tax.

Markon Produce Highlights

• Markon First Crop® (MFC) Premium Romaine Lettuce weights are higher on average than the rest of the industry (38 to 41 pounds compared with 36 to 39 pounds).

• Last week’s hot weather further pushed crops ahead of harvesting schedules and may bring about a premature end to the season. Some growers will make the short transition to Huron, California in mid-March before making the final move to Salinas in April.

• Expect higher potato prices through this month, as February is Potato Lover’s month.

PRODUCE HIGHLIGHTS

Blackberries

• Prices have inched up slightly. • Poor weather has reduced stocks in Mexico.

Green Bell Peppers

• Florida prices have fallen; the crop is at its peak.

• The Mexican market is also low; supplies are ample (into Nogales, Arizona).

Strawberries

• Prices are stabilizing. New crop Santa Maria, California supplies are increasing; weather in Oxnard is returning to normal temperatures.

• Florida volume is low due to rain. Mexican stocks (into South Texas) are ample, but demand is strong).

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