Meat production rebounds from a low (SAFM)
Shutdowns of processing plants have significantly impacted beef production due to COVID-19 infections among employees. Beef production fell 24.7% month over month in April and 19.7% YoY, as seen in the following chart. Beef production in April was the lowest monthly total since Feb. 2015. The last week of April was the lowest week with slaughter down 34.8% YoY. Production has improved since then with slaughter in the last week of May down 10.9% YoY. Due to the increased weight of cattle waiting for slaughter, production is estimated to be down 7.6% in the most recent week. Prices have also followed the swings in production in reverse. After averaging under $210 per hundredweight early in the year, choice boxed beef prices increased in late March. Prices peaked at $459 per hundredweight in mid-May before dropping to a weekly level of $374 per hundredweight at the end of May. The swings for pork were similar in trend with April production falling 20.9% MoM. Poultry was different than the red meat production, with April production down only 7.1% MoM. Last week Sanderson Farms said egg sets, chick placement, and hatch rates are significantly lower. Sanderson Farms revised its production target for 2020 down by 3.7%. Chicken prices are currently mixed with the ARA cutout index up 17% YoY with boneless breasts up 22.9% while jumbo wings are down 10.7%.
South Africa ends alcohol ban (BUD)
South Africa was one of only two countries in which AB InBev operated that banned the brewing and distribution of beer, the other being Mexico (Peru’s ban ended at the end of April). South Africa’s alcohol ban ended yesterday, but there are still restrictions. Alcohol must be purchased between 9 AM and 5 PM, and the ban is still in effect on Friday, Saturday, and Sunday. The ban started on March 27. The beer must also not be consumed where it is purchased. About three-quarters of AB InBev’s sales in South Africa are on-premise. Most of South Africa returned to work yesterday as well.
COVID-19 is keeping it dry down under (BUD)
AB InBev also announced the completion of the sale of Carlton & United Breweries, its Australian subsidiary, to Asahi as revised. The brands included in the sale include Foster’s and Carlton, but also include AB InBev’s global brands, including Corona and Stella Artois in Australia. AB InBev will use the $11B in proceeds to pay down debt, representing about .6 turns of leverage. Unlike many other countries that have seen an increase in alcohol consumption during at home restrictions, in Australia, alcohol consumption declined after a stockpiling spike in March, according to the Australia Beverages Association. Beer volumes fell 44% in April, while sales declined 55%. In the first two weeks of May, volumes declined 19%, and sales declined 26%. Wine sales fell 3% in April and 14% in the first two weeks of May. Spirits sales declined 19% in April and 6% in the first two weeks of May.
