Hamburger Supply Concerns

The commodity markets last week remained somewhat erratic with chicken breast prices continuing to move upward, table egg prices also finding support and the hard red winter wheat (think: high protein wheat for breads, pizza dough, etc) market falling Seger style ("Like a Rock") to its lowest price level since August.

Better supply expectations and improving soil moisture conditions are helping the hard red winter wheat markets lower. As a reminder, the USDA released their first 2023-24 crop expectations at the end of last month at their annual forum which I discussed last week. The next key data drop for the crops will come at the end of this month with the first farmer surveyed acreage numbers from the USDA. As we've discussed, the high prices and strong margins for farmers will likely lead to Peter Gabriel ("Big Time") plantings this year. Further, the weather is anticipated to cooperate for winter wheat, corn and soybean country deep into the spring.

Drought, however, is expected to persist for a large part of cattle country as shown above. We and our mothers know that the U.S. cattle and cow inventories declined in 2022 and are historically low which is partly behind the USDA's forecast for a 6 (think: Bill Russell) percent plus decline in beef output this year. Another big factor is cattle and cow weights are tracking below year ago levels.

Lower cattle and cow weights accompanied with declining herds can be especially concerning for fat and lean beef trim buyers. When we had a sharp reduction in cattle weights coinciding with smaller herds in 2014, the beef 50 and beef 90 markets annual averages rose 29.5 percent and 31.5 percent respectively. In other words, the risk in the beef trim markets (think: ingredients for hamburger) is almost certainly to the upside from here. And there's likely even more upside risk in 2024.

Datum FS now has forecasts for over 50 commodities comprising various beef, dairy, grains, pork and chicken markets. If you would like to learn more about a complimentary trial to the forecasts and commentary direct message me. Thanks for reading.