Despite good broiler egg production, the number of chicks being hatched just isn’t growing. Year-to-date (through July) eggs set in incubators are up 2.4% from a year ago and 2.6% above 2019. However, chicks placed for grow-out are just 0.5% above a year ago and 0.1% higher than 2019. And it’s getting worse. July chicks placed was 1.1% below a year ago and 0.7% less than 2019.

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Soy-oil fundamentals are terrible going forward and that’s predominantly due to energy policy. In the U.S., we put corn-based ethanol into our gasoline and can’t use more than 10% because it is corrosive and will destroy a car’s engine. The Europeans use biodiesel, which does not have a 10% blend wall. Diesel blends can contain up to 100% renewable feedstock.

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In Friday’s Cattle on Feed report, the USDA said feedlot inventories (at 11.3M head on July 1st), were down 1.3% from a year ago and 2% below 2019 levels. New feedlot placements in June were down 7.1% from last year and 5% below June 2019. Beef demand was red hot in June. Cattle marketings were 2.7% above a year ago and 4% above 2019.

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In last week’s WASDE, the USDA said larger corn supplies will more than offset increased exports and feed usage. This year’s crop stats are holding up despite below average precipitation. Last week’s crop progress report was very close to a year ago with 65% of the corn crop rated good-to-excellent; just 8% poor-to-very poor. Corn silking was at 26% vs the same (26%) a year ago and a 5-year average of 30%.

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While chicken prices have backed off a bit, supplies remain tight. Chicken in cold storage on June 1st was down 15% from a year ago. Wings in storage are nearly 20% lower. Total broilers (head) slaughtered for the first 5 months of 2021 are down 2.0% from a year ago and are 0.6% below 2019. That’s not helping wing supplies. However, average bird weights continue to recover, up 0.7% (Jan-May) vs 2020 and 2.7% above 2019.

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In the June 25th Cattle on Feed report, the USDA said feedlot inventories (at 11.7M head on June 1st), were up 0.2% from a year ago and the 2nd largest June inventory on record. New feedlot placements in May were down 6.9% from last year and 7.4% below May 2019. Feedlots are full. It’s processing capacity that’s been the issue - but there is some progress.

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Last week’s quarterly USDA Hogs and Pigs report showed some improvement in hog numbers, but also indicated tight supplies for the balance of the year. June 1st hog inventories at 75.7M head were up 1.0% from March 1st - but herd numbers are still down 2.2% from a year ago and the March/May pig crop was down 3.1% from last year.

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Last week’s NOAA drought monitor showed 26% of the western U.S. is now at the highest “exceptional drought” level. The first danger is power generation. Hydroelectric power capacity has already been reduced with the heart of the summer still ahead of us. Without some recovery, rolling blackouts are likely in California by August.

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Here’s how the JBS plant closures affected meat supplies. In beef, the daily weekday (Mon-Fri) slaughter average for the 2 weeks prior to Memorial Day weekend was 118,760 head per day. That compares to just 94,000 head slaughtered on 6/1 and 105,000 on 6/2. So, the hack caused total U.S. cattle slaughter numbers (not just JBS) to drop by 20.8% on 6/1 and by 11.6% on 6/2.

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The JBS cyber-attack last week affected all 3 proteins. Right now, chicken is the biggest (protein) issue for foodservice, but so far the hit to Pilgrim’s looks to be limited/manageable. The attack could not have come at a worse time with restaurants struggling to staff-up, supply-up, and reopen.

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Memorial Day kicked off the traditional “grilling season” in the U.S. Beef 90s trimmings averaged $2.52 per pound in May. And while that’s down from last year’s ground beef hoarding $2.91, it’s still well above an average of $2.22 for the month of May in 2018 & 2019. Meanwhile, we caught a break on beef 50s, which averaged $.79/lb in May vs. $2.08 in 2020 and an average of $.85 for 2018/19.

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In Friday’s Cattle on Feed report, the USDA said feedlot inventories, at 11.7M head on May 1st, were up 4.7% from a year ago - fueled by a 27.2% surge in April placements. But, discounting the Covid-reduced 2020 numbers and comparing to 2019, cattle inventories are down slightly (-0.7%) and placements 1.1% lower. With finishing (feed) costs high, producers would love to hold feeders on pasture for as long as possible.

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Last week’s WASDE report contained the USDA’s first look at commodity prices for 2022. Starting with grain prices, the USDA says corn (currently $6.85/bu) will average $5.70 for the 2021/22 crop year vs. $4.35 for 2020/21 and $3.56 in 2019/20. Soymeal (currently $423/ton) was projected at $400 in 2021/22 vs $405 in 2020/21 and $299 in 2019/20. That makes for a 2-year, 48% increase in feed prices.

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Recapping Thursday’s interview with Hudson Riehle, the NRA’s chief economist, it’s no surprise that staffing is the #1 issue facing restaurant companies this year. Given that handicap, supply chain professionals were most interested in understanding how much pent-up demand is headed their way this spring/summer – and what comes after that.

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Corn prices exploded in April, starting the month at $5.59 per bushel and finishing at fresh, 8-yr highs of $7.40 on Friday (4/30). Bullish price drivers keep piling up: lower-than-expected U.S. planting intentions, big Chinese purchases, weather problems in Brazil, and political issues in Ukraine. Corn prices had touched 4-year lows of $3.02 just a year ago.

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In Friday’s Cattle on Feed report, the USDA said feedlot inventories, at 11.9M head on April 1st, were up 5.3% from a year ago – fueled by a 28.3% surge in March placements. Granted, 2.0M new placements is a big number, but it’s being bumped up against last year’s Covid distorted, 25-year low of 1.56M, and compares to a pre-Covid, 5-year average of 1.95M.

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Last week the USDA ended its Farmers to Families Food Box (FFFB) program. Last year, the USDA pumped $3.8B into a program that absolutely terrorized dairy markets. In 2020, CME block cheese started the year at $1.90/lb, dropped to all-time lows of $1.00 (4/15), hit all-time highs of $3.00 (7/13), dropped back to $1.58 (8/11), rebounded to $2.78 (10/30), then fell again to $1.57 (12/2) before finishing the year at $1.64.

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In Friday’s WASDE report, the USDA projected greater corn feed use (up 50M bushels), increased corn used for ethanol (+25M bu) and larger exports (+75M bu). As a result, 2020/21 ending stocks were slashed by 10% to just 1.352B bushels – and the corn stocks-to-use ratio dropped to 9.1%. Historically, stocks-to-use below 10% has been very bullish for corn prices.

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Economists concur that a mountain of savings - roughly $1.8 trillion over and above what would have been sans Covid - will combine with high vaccination rates and pent-up consumer demand to release a flood of spending this coming Spring/Summer. In restaurants, it means a welcome jump in sales, but it also means a lot of strain on supply chain and staffing needs. The billion-dollar question is “How much and for how long?”

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Last week’s USDA Hogs & Pigs report has thrown lighter fluid onto prices for spring grilling season. The total hog/pig inventory was 74.8M head on 3/1/21, down 1.8% from a year ago and down 3.3% from last quarter (12/1/20). Breeding inventory was 2.5% below year-ago. The Dec-Feb pig crop was down 1.4% from 2020. Sows farrowed Dec-Feb were 0.9% below 2020.

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