Business Insights

January 2019 Market Outlook

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Beef

General comments

Cash Cattle prices are on the rise as packers need sizable amounts to catch up with production after some holiday-shortened weeks. Cattle traded last Friday at $123 live in the south, up $4 from the previous week. Cattle owners are now holding out for $125 as they see the demand coming. Packers have been successful passing on the higher costs by raising prices on several items.

Weather has been impacting cattle performance. Yields are falling in the north especially, below 62% and even dipping under 60%. That means lighter carcasses, less fat trim and less total beef production. This should have an upward bias on all cuts, but especially on grinds.

More cattle are grading choice and prime; this has lowered the spread over select well below last year, offering value in the higher grades. A smaller cow slaughter in December has supported the ground beef trade.

Loins

Top Butts: Choice and Select prices gradually trended higher throughout the shortened week. Prices will likely continue trending upward throughout the month of January. Current prices remain higher than their seasonal average. Short Term: Steady to firm pricing.

Strips: Prices were mostly steady to slightly higher this week for both Choice and Select strips. Current prices remain in line with seasonal averages, and will likely remain steady throughout January. Short Term: Steady pricing.

Tenderloins: Prices fell significantly this week. Values are moving downward in accordance with downward seasonal price trends, but current prices remain slightly higher than normal. Short Term: Steady to lower pricing.

Tri-Tips: Choice prices fell this week, while Select values were mostly steady. Prices are expected to move gradually higher throughout the month of January, and current prices remain higher than seasonally average. Short Term: Steady to firm pricing.

Ribs

Ribeyes: Choice ribeye prices were lower but Select values were higher. Prices typically trend downward through the month of January, and current prices are higher than seasonally average. Short Term: Steady to lower pricing.

Chucks

Chuck Rolls: Choice prices were steady to slightly higher while Select values made a noticeable advance. Prices are moving upward in accordance with seasonal price trends, and remain higher than seasonally average. Short Term: Steady to firm pricing.

Teres Majors: Prices trended lower for the second week in a row, but that will likely change soon. Seasonal price trends indicate that prices usually climb during the month of January, and current prices are outperforming seasonal price trends. Short Term: Steady to firm pricing.

Briskets: Briskets made noticeable gains this week. Prices continue climbing in accordance with seasonal price trends, and current prices remain significantly higher than seasonally average. Short Term: Steady to firm pricing.

Thin Meats

Ball Tips: Choice prices were lower but Select values moved higher. Expectations are unchanged, and prices are expected to increase over the next month. Short Term: Firm pricing.

Flap Meat: Choice prices trended higher while Select values were mostly unchanged. Prices continue to travel with seasonal price trends, but have outperformed seasonally average pricing. Prices are expected to increase through January. Short Term: Steady to firm pricing.

Skirt Meat: Values moved higher again this week for Inside and Outside skirt meat. Prices have bucked flat seasonal price trends over the last month, and prices are expected to continue their upward trajectory through January. Short Term: Steady to firm pricing.

Flank: Prices were higher for both Choice and Select. Price action this week coincides with expectations that prices will firm after New Year’s. Short Term: Steady to firm pricing.

Rounds

Peeled Knuckles: Prices made significant gains this week. Although current prices remain below seasonally average, prices are expected to trend higher through the month of January. Short Term: Steady to firm pricing.

Inside Rounds: Prices moved significantly higher and current prices are now in line with seasonally average pricing. Prices usually move higher after New Year’s. Short Term: Steady to firm pricing.

Bottom Round Flats: Choice prices were unchanged but Select prices moved lower. Current prices remain below seasonally average, but prices will likely firm through the month of January. Short Term: Steady to firm pricing.

Eye of Rounds: Prices climbed markedly higher after the shortened holiday week. As with most other thin meats, prices are expected to trend upward in the month of January, but current prices remain below seasonally average. Short Term: Steady to firm pricing.

Grinds

Ground Chuck: Prices fell after the shortened holiday week. Current prices remain in line with seasonal averages, and prices are expected to rise in January. Short Term: Steady to firm pricing.

81/19 Beef Grind: Prices were slightly lower this week. Expectations are unchanged, and prices are expected to climb throughout the first month of the year. Short Term: Steady to firm pricing.

Poultry

General Comments

Limited production schedules in the first week of the New Year were supportive of prices. Whole Birds, WOGS, and Wing prices saw the most significant gains this week with Thighs, Breasts, and Tenderloins not far behind. Wing prices will likely continue to appreciate as we approach the Super bowl, but offerings for other chicken products will likely stabilize with production schedules after the holiday.

Wogs

Whole bird and WOG prices firmed during the first week of the New Year. WOG prices are historically flat for the next few weeks. Production was likely limited this week due to holiday on Tuesday, which may help explain the market’s strength. Short Term: Steady.

Breast meat & tenderloins

Breast and tenderloin prices firmed before the New Year leading to slightly higher prices. Prices continue to present a tremendous buying opportunity. Short Term: Firm pricing.

Wings

Wing prices gradually ascended throughout the week. Prices will likely continue to firm over the coming weeks in anticipation of the Super Bowl. Short Term: Steady to firm pricing.

Thighs

Thigh and dark meat values were higher this week. Some of the market’s strength may be attributed to the limited production schedules from last week. Short Term: Steady pricing.

Turkey whole birds

Favorable cold storage inventories and promising export potential are supportive for the initial 2019 expectations. Market prices were steady this week and demand was relatively light to moderate. Short Term: Softer pricing.

Turkey breast meat

Boneless, skinless breast prices were steady to slightly higher this week. Prices are expected to hold steady to slightly lower over the coming weeks as seasonal demand wanes. Short Term: Steady to lower pricing.

Pork

General comments

Total pork production for the week ending December 29, 2018, was estimated at 402.3 million lbs. This was 30.6 percent under the previous week, and 9.7 percent below last year. Average live weights, at 287 pounds, were a pound higher than last week and two pounds higher than last year.

Bellies and Ribs moved higher last week on shortened holiday production. Loins, Butts, and Hams are steady with a weaker undertone.

African Swine Fever Update
China on Wednesday reported a new outbreak of African swine fever on a farm with 73,000 hogs as the highly contagious disease continues its spread through the world’s largest hog herd. China has reported more than 100 cases of the incurable disease since it was first detected in the country in August last year. This illustrates how prevalent ASF is becoming in China and how difficult it may be to eradicate. Expectations are that Chinese imports will increase in 2019 – getting their pork from North American, European, and Brazilian markets. We will continue to monitor the situation and keep you informed.

Loins

Prices trended lower this week. Seasonally, prices move sideways to slightly higher throughout January. Current prices still present buying opportunities well below seasonally average pricing. Short Term: Steady to firm pricing.

Tenders

Prices ascended this week. Values are expected to firm over the next month, and current prices remain below seasonally average. Short Term: Steady to firm pricing.

Butts

Prices were steady with a weaker undertone this week. Unlike many pork products, butt prices trend downward through the month of January, and prices are expected to continue softening. Short Term: Steady to firm pricing.

Belly

Values were slightly higher following the holiday weeks. Current prices are slightly higher than seasonally average, and are expected to hold mostly steady over the coming weeks. Short Term: Steady pricing.

Ribs

Rib prices were steady to slightly higher this week. Expectations are unchanged, and prices are expected to hold steady over the next few weeks. Short Term: Steady to firm pricing.

Hams

Hams were steady to slightly lower this week. Ham prices remain well below seasonally average, and prices are expected to hold steady for the majority of the month of January. Short Term: Steady pricing.

Dairy

Butter

Production is ramping up around the nation as cream is considered plentiful. Butter manufacturers anticipate heavy production after the New Year as they build stocks ahead of projected spring holiday demand. Butter interest for Q1 of 2019 has been decent with ongoing buyer/seller negotiations. Short Term: Steady to lower pricing.

Cheese

Cheese production is very active nationwide as bottlers and other processors begin taking less milk. Northeastern production schedules are active but bottling orders from educational institutions are decreasing. Western and Midwestern manufacturers are also maintaining active schedules and reported that holiday demand met their expectations. Short Term: Steady pricing.

Shell eggs

Supplies of all size shell eggs are available, which is not a complete surprise following the holiday season. Volumes moving into retail channels have declined in accordance with post-holiday expectations. Manufacturers were said to be pleased with the demand during the holiday season. Short Term: Steady pricing.

Milk & cream

Milk production trends are mostly unchanged from last week. Farm level milk output from the Western and Central regions is increasing at a moderate rate, but output from the Eastern portion of the U.S. remains mixed. Milk distribution was very active throughout the holiday season, and no major issues were noted. Western production schedules are in line with this time last year, and supplies are said to be plentiful due to the post-holiday build up. Midwestern milk is flowing into other processing facilities – most notably cheese.

Cream remains plentiful around the country and remains under downward pricing pressure. Consequently, the possibility of lower pricing persists. Short Term: Steady to lower pricing.

Seafood

Shellfish & shrimp

Shrimp: There were few changes recorded in the holiday-shortened week. Sellers were optimistic after the New Year, but were well aware of the current supply situation. Sales activity has been characterized as good, and sellers are less willing to discount.

Farmed White: Values were unchanged after the holiday with very few exceptions. There was slight weakness in 16-20 count Latin origin HLSO shrimp and 41-50 count HLSO Asian origin shrimp.

Farmed Black Tiger: Market conditions were unchanged after New Year’s. Supplies of large shrimp remain light, so prices remain elevated.

Wild, Gulf of Mexico: Prices have been steady since the fishing season closed three weeks ago. Prices are expected to hold steady over the course of the next few weeks.

North American Lobster: Tail prices strengthened across the board this week, and the market bias remains full steady to firm. Meanwhile, meat prices are largely unchanged but sellers are becoming less willing to discount their products. Short Term: Steady firm pricing.

Warm Water Lobster Tails: The market for larger sized tails is firming. The reason that prices are climbing can be attributed to the active demand and less-than-adequate supply conditions. Imports continue to move easily through the supply chain. Short Term: Steady to firm pricing.

Live Lobster: Sellers noted the active demand in anticipation of the New Year’s holiday. The hard-shell market remains undersupplied, which is placing additional upward price pressure. Short Term: Firm pricing.

Scallops: There were no changes to record in the scallops market this week. The market will likely hold steady until the new fishing season begins later this spring. Short Term: Steady pricing.

King Crab: Russian red and golden king crab remains full steady. There were higher offerings noted for both products because the market remains undersupplied. Short Term: Steady to firm pricing.

Snow Crab: Pricing on 8 and 10 ups remains firm, but smaller crab prices are steady to slightly weaker. Short Term: Steady to firm pricing.

Crab Meat: Blue swimming crab meat prices are steady with some lower offerings noted on all sizes. On the other hand, red swimming crab meat supplies are barely adequate which is placing upward pricing pressure on the market. Short Term: Steady pricing on blue swimming crab meat; steady to firm pricing on red swimming crab meat.

Finfish

Salmon: The West Coast Whole Fish market is unchanged, and the market undertone ranges from steady to full steady. Northeastern Whole Fish markets adjusted higher on 8-10 through 12-14 lb. fish as demand outpaces supplies. Norwegian Whole Fish prices also adjusted higher on larger sized fish due to the limited supplies due to the holidays. Lastly, Chilean Whole Fish prices were unchanged this week, and the overall market conditions remain unchanged.

Atlantic Cod: Supplies remain tight and demand remains active, so there is upward pricing pressure on Atlantic cod. Higher offerings were noted due to increased replacement costs and lowered quota. Short Term: Firm pricing.

Pacific Cod: Prices are under pressure as Atlantic cod prices continue to rise. But, it should be noted that raw material prices remain high. Short Term: Steady to firm pricing.

Pollock: Recent quota limitations coming out of the Gulf of Alaska were offset by increases out of the Eastern Bering Sea for the most part. Consequently, the market is mostly steady. Short Term: Steady to firm pricing.

Basa: Prices were unchanged this week. There was news that basa farmers in China intend on waiting for fish to grow larger, which will consequently limit imports in the short term. Short Term: Steady to firm pricing.

Catfish: Prices on the 3-5 oz. filet remains elevated and the market bias remains firm. Short Term: Steady to firm pricing.

Whole Fish Tilapia: Prices are expected to increase by 10% due to increasing import costs, but the market bias remains steady. Short Term: Steady pricing.

Mahi Mahi Fillets: Prices softened slightly this week as the Peruvian and Ecuadorian fishing seasons continue and product continues to flow in. Short Term: Steady to lower pricing.

Grains & oils

Grain & crop summary

Soybeans traded solidly higher Wednesday. Two factors are driving this movement: The hot and dry weather pattern in some of the key growing areas of Brazil and rumors that China has bought another 1.8-2.0MMT of US beans for their reserve.

Soybean oil

Mostly dry conditions in key parts of Mato Grosso during December has started to push ideas of the Brazilian soybean crop a bit lower from previous lofty expectations. While there aren’t any indications a major crop problem is at hand by any means, the less than ideal conditions in some areas are contributing to increasing views that Brazil’s total soybean crop this year could be less than previously forecasted. This is friendly for soybean oil prices.

Canola

With limited information due to the U.S. Government furlough, the canola market is playing follow-the-leader with the soybean market. There has also been a lack of farmer selling for canola due to the recent cold snap on the Prairies over the holidays. Expectations are that farmers will continue not to sell for the foreseeable future while there is uncertainty with weather and trade negotiations. This is neutral/friendly for canola oil prices.

Palm oil

As expected, India lowered the import duty on palm oil, effective immediately. Duties were lowered on palm oil imports from countries in the Association of South East Asian Nations, and specifically saw the crude oil import duty lowered to 40% from 44% previously, while refined palm oil sees import duties lowered to 45% from 54% for imports from Malaysia, while imports from other countries saw the duty lowered to 50%. Malaysian palm oil futures were solidly higher overnight on the news. First quarter Malaysian palm oil production typically declines after peaking Q4 of prior year. This is neutral/friendly for palm oil prices.

Produce

Idaho potatoes

  • Cold weather is expected in Eastern Idaho next week
  • These conditions may affect the number of potatoes packed and delay loading times
  • Internal black spots and bruising can occur when raw product is hauled below 18 degrees
  • Markon suppliers utilize on-site storage to minimize loading delays and defects

Highlights

  • This weekend is expected to bring some of the coldest conditions of Yuma, Arizona’s winter season so far, but Markon is optimistic that iceberg lettuce case weights and yields will remain high through early January.
  • Cold weather is driving up the bell pepper market.
  • Broccoli and cauliflower prices have jumped; supplies are tightening due to low temperatures.

Produce Highlights

Green Onions

  • Prices are up and will remain elevated through this week at least.
  • Low temperatures are slowing plant maturity and reducing supply levels.

Potatoes

  • Cold weather is expected in Eastern Idaho.
  • Temperatures must be 18 degrees or higher to haul potatoes from cellars to packing sheds. These conditions may affect the number of potatoes packed and delay loading.

Strawberries

  • Cold weather in the growing regions of California, Florida, and Mexico is decreasing volume.
  • The market is high.

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