What We're Watching This Week - Dec. 19, 2016

Brazil’s Cattle Industry Returns to Growth Mode: 

COMMODITIES 

2016’s higher input costs have handed Brazilian feedlot operators a rocky year. According to Cepea, return on investment (ROI) at feedlot operations in Brazil in 2016 has ranged widely between 1.46 and 11.72%. The forward outlook is more stable. The United States has not only reopened its market to Brazilian beef for the first time since 2003, but domestic demand in Brazil is also expected to rise by roughly 3% in 2017. With the 2017 Brazilian cattle herd projected to expand by 2% after several consecutive years of decline, we will be watching for supply updates from their national supply company (Conab) in the coming weeks.

A Veggie Tale Within This Month’s Cold Storage Report:

FOOD

We will be closely monitoring vegetable inventory levels on the release of the USDA’s monthly Cold Storage report this Friday. Despite annual frozen vegetable supply growing by 5% over the past 12 months, we did notice a few outliers in last month’s cold storage report. Gro data indicates that the amount of asparagus, okra, and broccoli in cold storage was considerably lower than a year ago. What’s more, Peru’s asparagus exports in October declined year-over-year by roughly 8% according to government data. Fresh Plaza also reports that Peruvian producers expect up to 15% higher prices on asparagus, owing to lower production this season.

US Egg Exports to Mexico Trending up Since 2012:

AGRIBUSINESS

With US chicken broiler production projected to grow only 2% in 2017, rising Mexican demand could boost US chicken prices. Using Gro, we found that although US production of eggs for hatching in September 2016 was roughly flat in comparison to 2015, exports of fertilized eggs to Mexico actually jumped by over 15%! Of note, these exports have peaked in October during the past two years. Since one month of data doesn’t make a trend, we will be keeping an eye on USDA-GATS data to see if trade flows follow their recent seasonal pattern.