New highs for corn (PPC)
Corn prices hit a new high for the year this week, as seen in the following chart. China purchased a significant amount of U.S. corn last week (3.7M tons), which will likely cause the USDA to raise its corn exports forecast. Corn prices in China are currently at $12 per bushel, $3 higher than U.S. corn, including the shipping cost. Farmers refer to chicken as “corn with wings” for a good reason. Corn feed represents the majority of the variable cost of raising a chicken. Poultry prices in the grocery store do not see the price increases necessary to offset the higher feed costs. Poultry prices were 5.6% higher in 2020. Poultry production will have to decrease at a faster rate than it is currently to get prices higher. In November, poultry production was up 1.2%. Preliminary data for December suggests that slaughter will be down compared to the prior year. The poultry industry is hoping for a surge in demand from restaurants and exports this year to offset the higher costs and create more demand. The bird flu in South Korea has added some expectations of increased exports. Food inflation is coming in 2021 as corn is an input for more than just chicken.
Brewery production improving (BUD)
Domestic brewery shipments of cans and bottles increased 10.7% in September, up from 10.4% in August, according to the Alcohol & Tobacco Tax and Trade Bureau (TTB). Shipments of kegs were 39.5% lower YOY, up from a 58% decrease in August. On-premise volume use was 7.1% lower in September than the prior year. Through the first nine months of 2020, total domestic beer production was 1.0% lower than the prior year. Production in September was 5.7% more than the prior year.
Canadian beer sales (TAP)
Beer volumes in Canada have been relatively flat in 2020. Canadian domestic beer sales increased 1.0% YOY measured in volume in November, improving from -2% in October. Imported beer sales decreased 17.1% in November measured in volume, similar to the 17.4% decrease in October as seen in the following chart. Total beer sales measured in volume decreased 1.9% in November, improving from -4.5% in October. Exports are reported on an additional month lag and increased 39.8% in October after decreasing 9.9% in September.
