Business Insights

January Market Outlook

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Market Outlook, Demand and Insights

General Comments
In the U.S.D.A. monthly Cold Storage report, beef stocks were reported at 489.5 million pounds, up 4.3 million, or 0.9%, from November but slightly below the average of analysts’ expectations. Beef stocks were 13.8% below the year-ago figure of 567.9 million pounds. The five-year average change in beef stocks in December is an increase of 19 million pounds. Beef stocks were 0.7% above the five-year average of 486 million. The beef figure was considered neutral for cattle. Estimates were for higher stocks than actually reported; thus, the report is viewed as bullish towards prices. The weekly federally inspected slaughter was assessed at 615,000 head. Last week’s harvest tallied 611,000 head. Live cattle weights were unchanged at 1383 pounds. Dressed carcass weights remained at 838 pounds. As of late Thursday, the cash cattle market had not established trade. Bids emerged Wednesday at $122 live, $192-$193 dressed. The consensus is that trade may occur at steady or higher prices. This is bullish for prices as higher cattle costs will bring up boxed beef costs. In addition, it illustrates how the better-than-expected demand is able to consume the increasing supplies of cattle and beef production.

LOINS
Top Butts: Both Choice and Select prices were about steady with a firm undertone. Choice is trading at near the same level as Select, making Choice a better value. Expectations are for steady firm pricing to continue through January. Short Term: Steady-firm pricing.

Strips: Strip prices remained steady on solid 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 few weeks, then much stronger pricing.

Tenderloins: Tenderloins are migrating lower, as expected. Much like the strips, look for some additional weakness through early to mid-February where Tenderloins typically bottom. The overall trend is lower, but current price levels look attractive to many buyers since we are about 20% higher just 6 weeks ago. Short Term: Steady to lower pricing, then much stronger pricing as we get into March.

Tri-Tips: Both Choice and Select prices migrated lower last week as some suppliers are discounting to move more product. Prices typically rally
from now until April. Short Term: Steady to higher pricing

Ribeyes: Ribeyes had a nice move higher last week; Choice outperformed Select. Look for prices to continue their price rise through March. Short-Term: Steady to higher pricing.

CHUCKS
Chuck Rolls: Chuck rolls moved higher with Choice seeing significant gains. Better demand and short supplies from cold weather are seen as the driving forces. Expectations are for this market to put in a seasonal top and migrate lower. Short Term: Steady to weaker pricing.

Teres Majors: Prices march on and march on up the hill. Supplies are short of meeting demand. Typically, prices rally from now until May. Short-Term: Steady to higher pricing.

Briskets: Briskets, both Choice and Select, held steady and moved sideways last week. It seems the market is righting the ship after its recent sharp decline the last couple of weeks. St. Patrick’s Day should be on the radar as buyers will look to procure their needs. Short Term: Neutral to firm pricing.

THIN MEATS
Ball Tips: Ball tips continue to be firm, experience slight gains last week. Ball Tips typically move higher from now until late March on consumers altering their preferences. Short Term: Neutral to firm pricing.

Flap Meat: Select prices were steady, while Choice migrated lower. Seasonally, Flap meat pricing is softer the next couple of weeks and then experiences a sizeable rally until May. Increasing supplies may temper the market from any significant rallies. Short Term: Steady to firm pricing.

Skirt Meat: Outside skirt meat had a volatile, wild move to the upside, but returned to near the previous week’s close by Thursday last week. Inside skirt prices migrated lower with a weak demand. Expect prices to remain about steady to slightly higher due to limited supplies. Short Term: Steady pricing.

Flank: Flanks move higher, as expected, with Choice outperforming Select. Many consumers prefer Flanks this time of year and expectations are for continued upward price movement. Short Term: Steady to firm pricing.

ROUNDS
Peeled Knuckles: Knuckle prices, both Choice and Select, bounced back and moved higher. 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: Choice Rounds were steady-firm while Selects were steady-soft. Both grades are trading at near the same level, making Choice a great value. Supplies are ample. Prices typically move lower in late-January and rally in late-February. Short Term: Mixed pricing.

Bottom Round Flats: Prices were steady last week with a firm undertone. Cold weather has affected supplies and increased retail demand. Short Term: Neutral to softer pricing.

Eye of Rounds: Prices moved sideways last week as supply and demand are in balance. The market for Eyes may have put in its seasonal top. Expectations are for continued declines until April. Short Term: Neutral to lower pricing.

GRINDS
Recent cold weather has increased demand for grinds and curtailed supplies. Prices for Fresh 50s continue to adjust higher. This trend should continue for a couple of weeks. Fresh 90s followed suit and prices were slightly higher. Prices typically rally in January, but supplies should start to increase as packers get their harvest schedules back online. Short Term: Steady to firm pricing on 50s and 90s.

General Comments
The U.S.D.A. released its monthly Chicken and Eggs report. It showed that broiler-type chicks hatched was up 2 percent. Eggs in incubators were up 3 percent year-over-year. Leading breeders placed 7.59 million broiler-type pullet chicks for future domestic hatchery supply flocks during December 2017, up 1 percent from December 2016. This illustrates the continued growing supply and should be bearish towards prices. In the monthly Cold Storage report from the U.S.D.A., chicken stocks were reported at 886.1 million pounds, down 1.2% from the previous month but 10.2% over a year ago. Turkey stocks were up 7.8% from end-November and 11.6% above a year ago. Whole turkeys in the freezer warehouses as of Dec 31 were reported at 109.9 million pounds, up from 109.1 million the previous month and up from 74.9 million pounds a year ago. Tom turkeys were reported at 61.1 million pounds, up from 33 million the previous year. The data was right in-line with prereport expectations and is considered neutral for prices.
Plants are trying to run full schedules when weather permits. Winter weather has forced plant closures and is making it hard to truck product around. WOGS and cut-up prices are steady. Breastmeat started to see price-point demand come into the market. Wings are in Super Bowl season and well supported. Thighs continue to see great export demand.

WOGS
Whole birds and WOGS moved sideways, but have a weaker tone. Prices typically rally this time of year, but supplies are more than ample and should keep a lid on any significant rallies. Short-Term: Steady pricing.

BREAST MEAT & TENDERLOINS

Jumbo breast meat moved all week with firm price points and demand. Tenderloins continue to zigzag higher. Demand has been great. QSR features are providing support. Short-Term: Neutral to firm pricing.

WINGS
Prices continue to firm up. Super bowl purchasing is at the forefront. Estimates from the National Chicken Council are that Americans will eat 1.35 billion chicken wings for the big game. The forecast is for firm pricing the next couple of weeks, but supplies are ample and growing. Short-Term: Firm pricing.

THIGHS
Leg quarters are steady. Frozen leg quarters were firm on good export demand. Thigh meat prices have been choppy, but are finishing the week at near the same level it started. Demand has been good, but supplies are ample. Short-Term: Steady pricing.

TURKEY WHOLE BIRDS
Discounting continues on whole birds, but at a less rapid pace. Supplies are ample for a weak demand. Short-Term: Steady to lower pricing.

TURKEY BREAST MEAT
Demand was a bit better last week for both fresh and frozen product, but supplies are more than ample. Short-Term: Steady to weaker pricing.

General Comments

In the U.S.D.A. monthly Cold Storage report, end-December pork stocks were reported at 490.8 million pounds, a decrease of 2.3% from the previous month. The report showed pork holdings 3.2% above the year-ago figure. The month-on-month decrease in pork stocks was 11.5 million pounds. Ham stocks at the end of December were reported at 81.1 million pounds, down 17.1 million from the previous month but 12.3 million above a year ago. Bellies in cold storage were reported at 39.7 million pounds, an increase of 4.5 million pounds from the previous month. The belly inventory was up 21.7 million pounds from the year-ago figure of 18 million. The data was right in-line with pre-report expectations and is considered neutral for prices. Total pork production for the week ending January 20, 2018 was estimated at 498.9 million lbs. This was 4.5 percent below the previous week, and .3 percent higher than last year. Average live weights, at 285 pounds, were even with last week and a pound higher than last year. Offering of Hams have tightened in recent days, leading to higher prices. Bellies are also fully supported with ongoing processor demand noted and inadequate supplies. Trucking issues are adding further support. Most plants are back to full production which is putting more loads onto spot markets. This is the month that prices for several pork cuts often hit seasonal lows.

LOINS
Pork loins moved higher last week, continuing their rebound off the low earlier in January. 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 continued to move to the downside last week. Demand has been poor. Expectations are for Valentine’s Day purchasing to give prices a boost from now until early February; however, supplies are ample. Short Term: Neutral to firm pricing.

BUTTS
But prices were steady with a weaker tone. 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 continue to rally, as seasonally expected. Fresh supplies are tight. The U.S.D.A. Cold Storage report revealed that there was a 4.5 million pound increase last month or up 12.8%. Although the increase was short of what is typical for December (13.5 million pound increase), current stocks are 120% higher than last year at this time. Short-Term: Higher prices.

RIBS
Spareribs move higher last week and Backribs were steady with a firm undertone. The rib complex typically sees support this time of year in preparation for spring and summer features. Supplies are good. Short Term: Steady-firm pricing.

HAMS
Up, up, and away. Ham prices were higher again last week. There has been excellent demand from both import and export markets. The trend higher should continue as we approach Easter purchasing; however, supplies are increasing. Short Term: Steady to firm pricing.

BUTTER
Cream into butter production is readily available. Butter production is moderate to active. Some producers are only churning to fill immediate orders; however, others are focusing on production for the spring retail push. Inventories are fairly healthy as industry contacts report moving regular contract loads. Butter demand is mixed as some market participants are purchasing steady loads, on the other hand others are holding off on purchases while there are offers on the spot market. Short Term: Steady to lower pricing.

CHEESE
Milk availability is plentiful for cheese production needs. Cheese output is active nationwide, parallel to abundant milk supplies. Cheese inventories are heavy in all regions. In the Midwest, to combat increasing supplies, some cheese plant managers report cutting back work schedules to four-day workweeks. Cheese demand is fair. In the West, cheese manufacturers report solid mozzarella sales for the pizza season, but the retail demand for most cheese types is indifferent. The cheese market tone is shaky. Short Term: Steady to lower pricing.

SHELL EGGS
Shell eggs continued their rebound higher last week as the lows from 2 weeks ago have really sparked demand. Wholesale traders are finding it difficult to cover their needs in the main, retail categories. Retail demand continues to be strong as major retails fight for foot traffic and market share. Short-Term: Firm pricing. The USDA released its monthly Chicken and Eggs report last Tuesday. It revealed that, as of January 1st, there are 382 million layers in the U.S. up 1 percent from last year. This includes 321 million layers producing table or market type eggs. This number is continuing to increase and should act as a bearish force in the future.

MILK & CREAM
Milk production developments vary across the country. Off the farm volumes in the Midwest and the majority of the Western region reveal a slight increase in output. Conditions are favorable for milk producers in the mountainous states, while steady in the Pacific Northwest. Throughout the East, farm milk volumes are mostly flat, as deficit areas of the region take in additional supplies from other regions. The re-openings of schools and seasonal weather are the stimulus of an upsurge in Class I orders. Relevant to plant and hauling delays, cream is abundant and supplies are readily available in markets for all Class needs. Short Term: Mixed to firm pricing.

SHELLFISH & SHRIMP
Foreign Shrimp: 26-30 count Latin American HLSO white shrimp are steady-firm. The balance of the market is about steady. HOSO shrimp are steady-weak. Asian white shrimp remain barely steady to weak throughout the complex. Demand is quiet for 8-12 and smaller HLSO black tiger shrimp. Peeled shrimp are about steady for 8-12 and smaller. 6-8 and larger shrimp are steady-firm due to tight supplies.

Domestic Shrimp (Gulf ): Prices are adjusting higher on supply concerns and higher replacement costs. Premiums were noted on U12 through 31-35 count headless shell-on brown shrimp, and scattered count sizes of HLSO white shrimp. PUD’s firmed largely across-the-board, and 61-70 and 71-90 count P&D’s were higher.

North American Lobster: Ongoing supply concerns continue to support a strong tail market. Supplies are held with confidence. Only contracted supplies are guaranteed. Meat values are a different story. Slow seasonal demand and ample availability is pressuring prices. Short Term: Mixed pricing.

Warm Water Lobster Tails: Larger tail inventory is short and prices are adjusting higher. Prime sized tails are steady. Short Term: Mixed pricing.

Live Lobster: Prices remain steady; however supply is still a concern. Short Term: Neutral to firm 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 red swimming crab meat market adjusted slightly higher across the board. There is a firm undertone. Fresh Venezuelan crabmeat is steady-firm due to tight production overseas. Conversely, the blue swimming crab meat market trended lower again across the board; many sellers are reporting slow sales. Conversely, Short Term: Mixed pricing.

FINFISH
Salmon: The West Coast wholefish market is firm across the board. Supplies are inadequate for a solid demand. 16-18s are the exception and their prices remain unchanged; supplies on this size are fully ample. The Northeast wholefish market adjusted lower on all sizes. Better weather is leading to a better harvest. Supplies are sufficient, especially on 12-ups. Demand is slow. The Northeast fillet market is soft; a dull demand is not meeting ample supplies. The European wholefish market adjusted slightly higher out of Scotland and slightly lower out of the Faroe Islands. The undertone on the overall market heading into next week is steady-firm. The Chilean fillet market remains steady. Supply and demand are in balance. The Chilean wholefish market remains balanced and prices steady. Short Term: Mixed 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 firm through the spring of 2018. Short Term: Neutral-firm 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 firm through Spring 2018. Atlantic Cod is the next option should forecasted Pacific Cod inventory levels play out. Pollock is also a good lower cost alternative to Cod. Short Term: Firm pricing.

Pollock: Both 1x and 2x frozen blocks are trending higher in price. Supplies have been limited due to poor fishing conditions. Start planning accordingly for an early Lenten season. Short Term: Steady to firmer pricing.
Basa: The market continues to adjust higher as tight supplies and higher replacement cost continue to plague the market. Short Term: Neutral to firm 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 catfish market is steady; however, the market for larger sized fish and fillets 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 flight delays. As a result, trades collected commanded a slight premium. The undertone is full steady at newly listed levels. Short Term: Neutral to firm 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.

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