Commodity Report

July 6, 2020

Beef- Drought like conditions continue to escalate into the early summer months, with dryness expanding deeper into the Central Plains, but also emerging throughout parts of the Northern Plains. USDA estimated that approximately 23% of the US cow herd is in an area experiencing drought, with 10% of those cattle in an area noted as experiencing severe or more intense drought conditions. Not only has the drought expanded, but the severity has worsened, as well, with increasing levels of extreme drought (and even instances of exceptional drought) conditions expanding from Texas well into Kansas, with Colorado also showing 25% of their cattle inventory in extreme drought. While the recent COVID-19 related packing plant slowdowns stymied some of the expected beef cow movement from pasture to slaughter, beef cow harvest levels have accelerated sharply following the Memorial Day week and are up 9% throughout the three actual reported weeks of June. Weighted average fed cattle carcass weights in 2020 have been above 2019 and the five year average every week so far. Through the first quarter of 2020, the weighted average ran 2.4% above 2019 but in the first half of the second quarter gains amounted to 4.5% above last year. Summer cow slaughter may run a little below last year, but will increase seasonally into the fall and expected to run above last year through some further modest liquidation of the beef cow inventory. Domestic 90s are expected to weaken going forward, as meat block costs continue to run well above the recent lower levels on the grinds. The rebound in steer and heifer harvest, along with significantly heavier carcass weights on a year over year basis, now has production of beef 50s above year ago levels. Beef 50s continued to weaken this week, into the mid and upper $50s. The fat trim may stay in the $50s through July and into early August. Grinds are expected to move sideways to somewhat firmer, with perhaps some lift in August in front of Labor Day.

Pork- Hog availability in the first quarter was 8% over the prior year with the harvest level reflecting that. Hog availability for the second quarter 2020 was just over 3% but obviously not realized on plant closures and an inability to accomplish those harvests in full. With hogs carried over, the third quarter is expected to show an availability over the prior year by more than 5%, with a substantial increase in pork product to clear now that harvest levels are normalizing. The hog harvest for 2021 still is being drawn, but if farrowing reductions for these next two quarters are even partially realized, hog harvest for first quarter 2021 could be down more than 5% from 2020, but still likely larger than first quarter 2019 in absolute terms. The contraction has begun in the hog herd and commercial pork production in the US, but by how much and for how long is still yet to be determined. Retail is just now putting bacon in the ads, but pricing is not necessarily exceptional just yet. Look for bellies to be soft for another week or so, with slow lift through July on plants expected to slowly wake back up to process for product. The robust supply of animals coupled with weak food service demand expected in July will help to mute the price increases. Spareribs strengthened during the start of the week, on fresh buys that were still intended for the Independence Day holiday weekend. As product could no longer make it in time for the long holiday weekend price started to pull back as expected. Price should ease consistently this week, though not aggressive as spares and St louis style ribs were in the ads. There will be replacement of product and acceptable movement for the remainder of the summer.

 

Poultry- According to the most recent USDA Cold Storage report, broiler meat stocks ended May at 857 million pounds. The total was 77 million pounds lower (or down 8%) from April levels, although still up 3% over May 2019. Harvest during May was 732 million head, which was down 8% compared with last year and down 3% versus April. May chick hatchings were 807 million head, down 50 million head compared with a year ago (down 6%) while rising 34 million over April (up 4%). The lower planned chicken placement for May set up the lower harvest head count experienced in June. The harvest for the week of June 27 was 165 million head, up three million pounds from last week and down 11 million pounds (or 7%) from 2019. With broiler weights continuing to be significantly higher than last year at 6.4 pounds (due to the skew to big birds in the live production mix as discussed in featured analysis), ready-to-cook broiler meat production was down just 4%. Average weekly prices slipped below $1.20for boneless skinless breasts, as anticipated pre-Independence Day retail feature support did not materialize, and foodservice re-openings have yet to reach demand critical mass. Poultry operations have managed to keep current market needs supplied despite COVID-19 plant associate infections and absenteeism. Big bird plant deboning line time is keeping customer needs met while foodservice demand lags availability. Small and medium bird parts are trading at a significant premium over jumbo. Restaurant traffic is improving but, with rapidly emerging hot spots, local and state government are stepping back to phase one social distancing guidelines, again putting any economic recovery timetable in jeopardy. Boneless/skinless breast fluctuates day to day with average price reported down $0.04 to $1.19 per pound by USDA for the holiday-shortened production week. As we learned from last weeks USDA cold storage report, there was still plenty of breast meat languishing as freezer stock when the month began. The boneless/skinless breast meat price averaged $0.04 higher this week than in 2019. expected. Assured supply remains a risk nearby as the COVID-19 infections continue to disrupt staffing and pose temporary closings. The impact of this would be the risk upside price volatility. Tenders prices rose $0.03 to $1.34 but the tires appear to be spinning in loose gravel some $0.44 below the comparable year-ago week. Restaurant traffic recovery is key to tender usage and demand recovery. Wing prices moved up $0.02 this week averaging $1.82. Although this weeks price was $0.11 below a year ago, wing demand is firm. Upside price risk is contingent on access to dining rooms and reinstatement of live televised sporting events. Downside price risk on wings lies in a fall resurgence of COVID-19, reclosing closures of restaurants, and accelerated harvest headcount addback.

Seafood- The Canadian snow crab fishing season is entering its final stages after a COVID-19 delayed start. As of June 29th , 81% of the Newfoundland quota had been landed. Both the Newfoundland and Gulf of St. Lawrence snow crab quotas are higher this year and slack food service activity is tempering demand. Still relatively limited snow crab supplies are anticipated to persist. Salmon filets currently selling at a discount to 2019 prices. Imported shrimp pricing steady. In general seafood pricing expected to remain at or below prior year levels as food service accounts for a large share of seafood demand and does not easily transition to retail.

Dairy- The CME cheese block and barrel markets remain historically inflated. The butter markets have been softening. Per the USDA, May 31st U.S. cheese inventories were up 5% compared to the previous year. Butter stocks at the end of May were up 21.2% (y/y). Anticipate cheese prices to correct lower due in part to lessening exports and solid production. Long term contracting should be on hold. The butter markets could experience some modest declines from here but prices usually firm during the summer as cream supplies become seasonally tight. Some long-term buying for your butter needs may be deemed.

Grains - Corn and soybean pricing remains under pressure as weather forecasts currently indicate good yields and large production. The possibility of dry conditions in some winter and spring wheat regions could affect output, but strong international wheat exports will keep pressure on our domestic prices.

Produce- Weather during this time of year can bring added volatility to the produce markets. The roma tomato markets are priced above a year ago due in part to hot temperatures, which may be challenging production. Tomato prices usually fade during July but rise in August. Avocado prices remain well below year ago levels on adequate supplies and soft food service demand. Hass avocado prices since 2015 have averaged 9.3% higher in July compared to June. Potato supplies are tight due in part to last years light harvest which will support prices.

 

Commodity Report

June 8, 2020

Beef- The well documented and widely discussed impact of COVID-19 on the red meat and poultry sector is finally finding some air of stability heading into early summer. In late April, the trough in weekly production declines across the beef sector came in at 33.6%, while pork production was off a similar 33.9%. This week continues to close the year-over-year gap though, with weekly beef production estimated at 522.6 million pounds, down just 0.4% from a year ago while pork production came in at an estimated 537.4 million pounds, up 4.2% from a year ago. Domestic lean boneless beef showed some weakening this week from the recent record levels above $300. Although US cow slaughter is projected to remain below year-ago levels heading into summer, the large declines on prices for grinds likely will pressure prices on 90s. While domestic 90s may stay in the $285 to $295 area over the next few weeks, the $270s may be in the cards for July and the $260 area for August. These prices still would be well above last year. Beef 50s continued dropping lower this week, reaching into the mid $70s. A more sideways range from the $70s into the $80s may develop in the coming weeks. The grinds showed huge collapses in prices this week, with ground 73s averaging near $250 and the 81s in the $260 area. This comes after being above $500 just two to three weeks ago. Ground beef feature activity, as measured by store counts, continues to run at a fraction of the levels of previous years, while feature prices continue to increase. The Independence Day period is usually strong for ground beef ads, but that holiday may also suffer from lack of activity.

Pork- The hog harvest this recent week was 2.45 million, 1.76% above the prior year. This was accomplished by the weekday harvest level that was able to achieve 87% of the prior, peak capacity as well as an exceptionally strong Saturday level above 300,000 hogs. The industry is now at 88% of weekly capacity and the remainder of June likely will see weekly harvests over 2.45 million and a prove a production increase over 2019. How many hogs will this accomplish in clearing up the backlog? No one knows but, for right now, there are more hogs available than packer capacity with hog valuations under extreme pressure on the weakening cutout. June will prove a record production level for the month and food service demand will not be back to last year's levels on reduced travel expectations still. The risk is that significant gains in the cutout and the hog valuations do not materialize in June, with only modest expectations for improvements in July. Things are slowly opening back up and jobs are being added back. Independence Day should prove the next major increase for demand, with still plenty of time to prepare. Hog weights slowly are trending back lower but not significantly enough to demonstrate that animals are being cleaned up aggressively just yet. Butts continued with last week' price reset, in nearly identical fashion this week. The highs from two weeks ago dropped more than $100 for bone-in, now handily below the prior year pricing structure. Expecting this to continue could prove unwise, as butts will find additional volume into Asia at these new levels. Spareribs also made a full price recovery this week, the most aggressive price drop for spares in the last few years, almost cut in half in two weeks. The drop comes as fresh product supplies continue to increase in availability, as well as food service demand not opened up as fully as some expected by the first week of June. The lean trimmings tried to inch lower but buyers are still tight on product given processing schedules trying to make up for lost time and healthy secondary product demand.

Poultry- As integrated processors look ahead to supplying a return of broiler meat demand in August, weekly eggs set in incubators inched up another one million eggs for the week to 235 million. This is virtually level with 2019 same week sets. Going into May, the broiler hatching-type egg layer flock was about 3% higher than a year ago, which pushed up potential egg availability. With the gain in momentum of COVID-19, plans for egg sets and the resulting chick placements have been reduced to address the dampening effect of temporary restaurant closings on sector demand and to respond to worker absenteeism and social distancing safety measures on plant throughput. Chick placements rose by five million to 184 million head in the most recent week reported by USDA, which still is 3% below this week in 2019. Harvest was just 145 million head for the holiday-shortened processing week, which fell about 2% back of the post-Memorial Day week last year. Average liveweights held at 6.4 pounds for the third consecutive week. The Jumbo bird weight range (7.5 pounds and up) eased down to 9.2 pounds while harvested headcount share came in at 23% of the total, while the 4.25-pound and down foodservice size birds accounted for 19% of total head coming through the plant back door. This years second quarter has been cooler than normal. We expect the warmer temperatures of June through August to offset the current flock average weights. Demand mix had an impact on average liveweight in recent weeks as relative headcount for the small birds preferred on fast food menus declined. Ready-to-cook (RTC) broiler meat production was 710 million pounds, up 2.5% versus last year. With foodservice still only partially re-opened and meat cases suddenly reporting full of competing protein with minimal feature activity, white meat prices continued to decline dramatically for the second week. Prices for boneless/skinless breast meat, as reported by USDA, averaged $1.33 per pound this week, which was down $0.18 from the previous week. Volatility is expected to remain a factor nearby as the COVID-19 infections at processing facilities challenge staffing and pose temporary closings. Tenders prices have been slowly moving higher to the $1.26 area but remain $0.55 below this time a year ago. Prices for wings in the Northeast markets dropped $0.03 to $1.72. This weeks price was $0.19 below a year ago.

Seafood- The Canadian snow crab fishing season is underway after delays brought on by COVID-19. As of May 29th, 33% of the Newfoundland snow crab quota had been landed. The Newfoundland quota this year is nearly 10% bigger than the prior season. World snow crab supplies are limited but slack food service demand has weighed on the markets. Snow crab price relief could occur in the coming months. Lower food service demand has created near term buying opportunities as a number of seafood importers have inventory in their freezers, but this may not last long as their suppliers were also hit with processing plant shutdowns attributed to COVID-19.

Dairy- CME cheese block and barrel prices are the costliest in eight months and six months, respectively. Continued buying for the food box relief program by the U.S. government is supporting prices. April 30th U.S. cheese stocks were a record high for any month. This factor and declining exports say the downside risk for the cheese markets should be respected. The CME spot butter market on Friday had the highest weekly close in 10- weeks. U.S. government buying is boosting butter prices also, but stocks are big. Butter prices are usually the highest in the summer, but this years seasonal rises may be less intense.

Grains- The food oil markets are starting to firm. Food service demand in the U.S. is improving. This factor and better food oil imports from China are helping support food oil prices. World food oil supplies are projected to remain historically limited. Thus, there may be more upside to food oil prices in the coming months.

Produce- - The potato markets have firmed from the lower levels earlier this spring. Food service demand is slowly improving, and stocks remain historically and seasonally low due to the short harvest last fall. Typically, the potato markets are firm into at least late-August. Notable potato price relief may not occur until then. The avocado markets have firmed during the last week. History suggests that the avocado markets could be steady to higher for the month of June. Still, lackluster food service demand could temper any notable upside potential.

 

Commodity Report

May 7, 2020

Beef- As COVID-19 shutters packing plants because of positive cases and absenteeism, April slaughter is expected to be sharply lower from March and April of last year. It could be early to mid-summer before slaughter and beef production begins to rise, month to month, and levels return toward year-ago levels. When it does, the packing industry could see some of the highest front-end cattle supplies relative to current packing capacity. The beef 50s have continued to skyrocket this week with mid-week pricing approaching $230. Weekly steer and heifer slaughter has dropped toward the 350,000- to 360,000-head area, compared with around 510,000 head last year. This week's harvest could drop toward the 310,000 area, while last year was above 540,000 head. Prices will remain high until buying activity is "choked off" by the price levels and until production shows some increases. Even then, increases in output may be slow to develop and prices will remain relatively high on a historic basis. Domestic 90s increased to the mid $250s this week. The recent sharp increases in wholesale prices on loin cuts are going to make retail feature activity for Memorial Day more difficult. Although retailers would like to be active in featuring steaks into this popular grilling holiday, it will be difficult to offer attractive feature prices.

Pork- This weeks harvest was 1.6 million, more than 15% below last year, almost one million less than could have been achieved if plants were healthy. The futures market continued with last weeks rally, repairing the entire curve off the bottom from a few weeks ago. The board continues to price insecurity into the structure, not maintaining any degree of normal spreads or premiums from one contract into the next. The rally was only achievable as the basis for May saw the cash markets chasing higher the last two weeks. With the cutout screaming higher and not relenting in the short term, the cash hogs moved higher with plenty of hogs tied to the cutout and are not likely to retrace. This puts gains in the cash markets likely the next two weeks, with this weeks close on the May contract a potential reality (and above break evens for producers). Despite the strength in May, June is not yet ready to price at a premium to June and communicates the markets insecurity. Maintaining the slight discount to May gives it the agility to move up or down based on a tighter basis level than normal. The close of the week put profitability back in play for producers through to the end of summer, but only beginning to price in potential for hog demand. The cash forecast is currently much higher than the futures market is willing to price in, but the board still is a fair sentiment given the vast unknowns. The most difficult thing the board will have to price over the coming weeks and months is the level of depopulation efforts and from which part of the herd it will impact the most. Predicting the supply off hogs as the May contract falls off the board and June basis levels need adjusting will be shooting in the dark.

Poultry- While labor constraints have taken focus in recent years, the situation has become dire as measures to curb the spread of COVID-19 and economic impacts thereof have increased absenteeism at the plant level in recent weeks. From a supply standpoint, spot market conditions have rapidly gone from an abundance of food service product to extreme tightness as a result of production constraints throughout the animal protein sectors. Labor shortages are not anticipated to get better nearby and, with increased testing being reported this week, it is reasonable to expect that the labor situation will remain forefront and worsen. Front end supplies continued to retreat in the most recent week reported by USDA, signaling both that hatchery supplies are constrained by COVID-19 labor issues and that integrators are expecting prolonged production issues as current chick placements still are roughly seven weeks away from slaughter plants. For the week ended April 25, chick placements totaled just under 172 million head, which was a 7.7% decline when compared with the same week a year earlier. In nominal terms, the weekly total was roughly 20 million head lower than where weekly placements were trending during March. The decline in chick placements was foreshadowed by a precipitous decline in egg sets early in April, but placements as a percent of eggs set in incubators suggest intentions are being underutilized at a rate not seen in at least the last 30 years. Following revisions, chick placements during the week of April 11 were just 74.2% of eggs set in incubators during the week ended March 21. It was a database low. Placements as a percent of eggs set three weeks earlier improved in the most recent week but, at 76.2%, remains well below where this metric was during the first quarter. A mark at 80 percent or higher shows industry confidence in the outlook. Additionally, pressure on supply is expected as eggs set in incubators remain well below capacity. Assuming eggs set in incubators remain below 230 million through the end of May, this will pressure available broiler meat supply through August. With supplies remaining tight, demand returning in food service and potential for more panic buying at retail, it would not be surprising for front-end supplies to return well above the prior-year levels as COVID-19 production constraints ease later this summer. However, the timing and velocity to which integrators will be able to accommodate elevated use is not yet reflected in the long-term forecast. For now, this should be considered the risk to the supply forecast

Seafood- Sluggish demand, particularly from food service, is weighing on the world seafood markets. The Norwegian Seafood Council is reporting that prices for farmed salmon is trending well below the prior year. As restaurants slowly reopen in the U.S., seafood demand is expected to improve. But the upside price risk in the salmon markets during the next several months could be relatively limited.

Dairy- After hitting $1.00/lb. during March, both cheese block and cheese barrel prices have risen 20.7% and 19% respectively. Improving restaurant operations suggests that the spot cheese markets may have established a long-term bottom. The spot butter market last month was the cheapest in over five years but has found modest support as of late. Domestic butter stocks on March 31st were up 14.8% year-over-year. This factor and solid butter production will equal adequate supplies for the pending fall time baking season. Still, the downside risk for the butter markets from here could only be nominal.

Grains- World food oil prices have remained historically low. This is despite COVID-19 restrictions limiting trade. As the world economy recovers during the next several months, demand for food oil is expected to expand. Thus, the downside price risk in the food oil markets from here may only be nominal.

Produce- The avocado markets have remained firm. Strong demand ahead of the Cinco de Mayo holiday is helping support the markets. The year-round popularity has tempered any demand fall off from the holiday in recent years. Further, history suggests that the risk in the avocado markets is to the upside as May progresses. The five-year average move for the Hass 48 count avocado market during the next three weeks is an increase of 9.8%. Lettuce demand is starting to improve with better food service sales. This could temper any seasonal price declines during this month.

 

Commodity Report

April 7, 2020

Beef- The escalating COVID-19 concerns and increasing quarantine protocols pushed consumers to supermarkets in mid-March and pushed wholesale boxed beef prices towards record short-term increases. "Family style" as well as value-based end meats making the most of the move up. Grocers were scrambling to refill barren meat cases following reports of grocery store beef sales jumping in excess of 90% from the year prior. With most shelter in place protocols extended until April 30 at the earliest, foodservice sales will continue to suffer greatly, with a recovery not likely to be noted even through the second quarter of 2020. In a sharp reversal of the previous two weeks, packers constrained this weeks cattle harvest to an estimated 626,000 head. This was 50,000 head smaller than last week, with packers responding to a major slowdown in beef buying activity. Ground beef prices have started retreating from the record to near record highs of last week, with further downside expected in the weeks ahead. But prices likely will remain above year-ago levels for a while. With the loss of sit-down capacity at BBQ restaurants and more reliance on take-out orders, briskets have fallen sharply and may have limited recovery into the spring. Choice 189A PSMO tenderloins dropped below Choice 112A heavy boneless lip-on rib eyes last week for the first time in history, they dropped below Choice 180-3 strip loins 0x1 for the first time this week. Prices are getting down toward the recessionary lows in 2009. The market will have to rely on the willingness of retailers to aggressively feature tenderloins, while waiting for the restaurant trade to start opening and recovering down the road.

Pork- The lean hog futures were volatile again, dropping sharply on all contract months to new life-of-contract lows. The sell-off was the most severe on the nearby contract as demand for pork (and consequently hogs) took a tumble with demand-planned adjustments on the food service side of the industry. It is unclear yet if cold storage levels are being released now but, if so, then product is appearing on the market without the need to harvest animals. This could be exacerbating the poor demand for hogs. The cash market hogs were under extreme pressure this week and will likely be under pressure another week given the cutout is not forecast to strengthen just yet. Bellies dropped aggressively this week, as secondary processors have made decisions to curtail food service production-style bacon. The price points on bellies should be able to create a price reset at the retail level soon enough and start to buy additional retail demand, but, so far, bacon has not been the highest on home consumers' lists. Look for a soft pricing structure through April with some pricing choppiness. Butts dropped back aggressively after skyrocketing the two weeks prior, now back down to a much more reasonable level and even getting the point of possibly being oversold. The food service demand planning has relinquished some of its forward hold on product, so packers are working hard to clear the product through the retail level. Spareribs moved aggressively lower this week, the point of performing the largest one-week correction in history of spareribs. Food service continues to relinquish some of their demand planning, no longer afraid that China would be taking all product for April and May.

Poultry- Leading into the US spring grilling season, domestic broiler production was record large and growing at a substantial rate. February ready-to-cook broiler production was reported up 4.6% from a year earlier. In addition, total chicken in US cold storage facilities was reported record large to end February at 925 million pounds. The anticipated glut of beef, pork and poultry was poised to pressure markets. However, with consumers now drawing down supplies at the retail level, the broiler meat complex has been supported in recent weeks. Chicken is expected to remain a staple item for US consumers this year, but now looks to gain relevance in shoppers carts this year as the scope of economic hardships widens. In the nearby, product typically destined for food service will remain in surplus. Alternatively, retail channels, which were barren just three weeks earlier, are seeing an influx of supply from multiple protein fronts. As the effects of stay-at-home measures grew in the Northeast markets this week, the market took a decisive path, which was markedly different from last week's tone. Product movement difficulty was evident throughout most of the broiler meat complex, but most notably was the degree to which discounting was necessary in whole birds, breast meat and wings to keep supplies moving through the system. Even at deeply discounted levels, product had difficulty finding a home this week in most cases. Retail switched focus from entertaining options to keep stores shelves stocked to turning away product that typically garners a strong premium just because they could not make it fit the shelf. Boneless/skinless breast meat values dropped 20 cents per pound, on average, and were 25 percent lower than where they were a year earlier. Forecasters anticipate a continuation of the current low price environment over the next several weeks, but remains cautiously optimistic about the opportunity of firmness returning during May, especially if food service support begins to return (despite obvious obstacles). Price observations for tenders indicated moderate easing, not atypical, and not overly taxing to the complex. However, with wing demand falling apart last week, prices reported by USDA declined significantly this week and were down more than 30-cents per pound when compared with the previous week overall. A dampened price environment is expected to be necessary over the next several weeks to remedy clearance issues, especially for wings, which are typically a slow mover at the retail level in raw form and lack opportunity to clear through the glut of availability.

Seafood- Seafood demand is suffering due to food service operation challenges and are likely to weigh on markets this spring. The snow crab markets are anticipating the Canadian fishing seas. Expectations are that the Newfoundland snow crab quota could be bumped higher from prior year but still remains historically low. No major improvement is expected with the Gulf of St. Lawrence quota. The seafood market is making the necessary short term adjustments to supply retail with items needed to fill consumers shopping lists and waiting to see when food service demand comes back.

Dairy - The cheese block and barrel markets last week were at their lowest levels in over a year. After an initial boost in retail cheese demand from the retail sector due to COVID-19, prices are now falling sharply due to reduced food service demand. Spot butter prices continue to trend sharply lower and are the cheapest since January 2015. Butter stocks are large and food service demand is fading pushing prices lower. Dairy markets are expected to remain choppy.

Grains - The USDA released 2020-2021 farmer surveys on acreage estimates. Total corn and soybean plantings were at record levels. Corn was the second largest in over 80 years. Soybeans were the third largest on record. The market will now shift their attention to the planting season to determine how many acres are actually planted.

Produce- Lettuce supplies are limited due to poor weather conditions. Iceberg shipments fell 23% last week vs prior week and were 34% less than the same week last year. Normally this type of volume declines would have lettuce pricing skyrocketing, but the lack of food service demand is tempering prices. History would suggest that downside pricing in the iceberg lettuce market is fairly limited. Avocados and potatoes are also seeing limited demand due to their wide use in food service. Their prices are on the decline.

 

Commodity Report

March 6, 2020

Beef- The beef markets are experiencing severe nervousness regarding the potential impacts of coronavirus on world economies. Commodity markets have felt the effects through lower near term prices. Live cattle futures were among the hardest hit within the commodities. Most actively traded April lost more than 1000 points. April is nearly $7.50 below cash, compared with a more average basis of being about $3 under cash at the beginning of March. Even with the market becoming technically oversold, the panic selling makes it difficult to find buyers in a distressed market. Despite liquidation in February and April, total open interest did see some increases this week. Total commercial red meat production was reported at 4.96 billion pounds, up 5% from 2019. Increased cattle slaughter coupled with heavier carcass weights continues to be the theme for 2020 and that trend is expected to remain for at least the first half of this year. Store counts on retail featuring of ground beef were larger than last year in the first two weeks of the year, but have been running well below year ago levels since then. Year-to-date average is down 6%. Retail feature activity on ground beef tends to increase from February into March, have a lull in April, and then move aggressively higher in store counts into late spring and summer. There was also increased cost pressures to the foodservice sector. Retail ground beef prices have been higher so far this year, and likely to stay mostly above year ago levels heading into spring and summer. While seasonal trends in feature activity are expected to occur going forward, store counts could remain below year ago levels.

Pork - Cold storage levels were revealed for the end of January, approaching new records. January's total was 625.19 million pounds, just shy of the January record by 0.01%. This was an increase over last year by 11% percent. Last year averaged higher than 2018 by 5%, with an increase certainly expected this year, possibly 8% over 2019. Large stocks were intended through this January as the industry prepared for the results of the Phase One US-China trade deal that would have China buying more product from the US staring in mid-February. There was concern over product continuity for the supply over the coming spring and summer months with players working hard to ensure product is around them. This sentiment, however, did start to shift as COVID-19 in China curtailed the short-term exuberance for US pork exports to China. Cold storage does typically see additional stocks building in February as product is rotated for Easter preparations. March typically sees a drawdown of stocks from those Easter hams, which usually makes more space for bellies. Bellies in cold storage rotation, at the end of January are nearly 32% above the prior year, the largest level in the last five years and since the last January record in 2014. This comes after setting records from the most recent September, October and December as well as a record large fourth quarter rotation of bellies. The Lean hog futures traveled the way of the rest of the financial and commodities markets this week, with strong hits on the way down. The world markets made major price concessions for the last five days on fears of COVID-19 impacting economics worldwide. Market participants took risk off the table in all corners of the markets, with strong selling and heavy volume throughout the week. For lean hogs, the largest losses were experienced by the April contract, with roughly 45 days to expiry and the immediate impact of COVID-19 already being.

 

Poultry - According to USDAs most recent Poultry Slaughter report released this week, ready-to-cook (RTC) broiler meat production totaled 3.95 billion pounds during January, which was record large for the same month, and up 6.5% when compared with a year earlier. Strong gains are anticipated for the first six months of the year. During the third quarter there is opportunity for production to begin easing when compared with a year earlier due to multiple factors, but mainly inclusive of consideration of the margin compression and clearance issues that are expected to be exacerbated by the imbalance of sector demand (read too much jumbo production and not enough small and medium). With the quick service restaurant sector pressuring supplies of breast meat from the medium bird segment, the returns are looking much better than in the jumbo segment. Wing movement continues to be quite impressive, despite some sluggishness that has shown up recently which supports a narrative inclusive of support to the medium-to-jumbo production as well, but overall, supplies in the value-added segment have appeared flush, but not necessarily incumbering for quite some time. Boneless/skinless breast meat prices reported by USDA, were up more than three cents per pound, on average when compared with the previous week. For boneless/skinless breast meat, prices are expected to continue firming moderately, with support gaining more in the medium-and small size segments relative to the jumbos. Prices are forecast at a nine-percent discount to a year earlier during April, which suggests opportunity for good movement in May and continued use through Memorial-day. Should dark-meat counterparts remain amply supplied, and prices remain dampened therein, the market could easily see additional pressure beyond expectations over the next several weeks. Wing prices have been on a precipitous decline over the last three weeks. This week USDA showed a weekly weighted average of $1.71 per pound, which was down slightly from forecast, and down eight cents from the previous week, as well as a seven cent per pound discount a year earlier. There is a growing risk to additional volatility beyond the bounds of the capabilities of the forecast over the next several weeks. While spot market conditions remain in surplus, USDAs Cold Storage totals to end January presented somewhat conflicting evidence of tighter supplies of wings. At 50 million pounds, wings in cold storage to end January were down 10% from December, and down 25% from a year earlier. Long term cold storage remains thin.

Seafood- Asias seafood imports have suffered in recent weeks due to the coronavirus induced slow economy. During January, Indian shrimp imports to China and Vietnam were down 23% from the previous year. Other countries are helping make up the difference, however, including the U.S. Thus, solid U.S. seafood imports may occur in the near term assuming no major economic disruption. This could weigh on the shrimp markets this spring. Salmon and snow crab prices are likely to be less affected.

Dairy - Last week CME spot butter prices hit the lowest level since March 2015 but have risen 10% since then. Class III milk futures are above Class IV milk futures which can temper butter production. This factor and the historical price trend suggest that the downside price risk for butter from here will be nominal. The cheese markets have displayed some weakness in recent weeks, but block prices remain inflated for March. Stronger U.S. cheese output, due in part to bigger milk supplies plus notably cheaper EU cheese prices, could push prices lower in the near term. Yet, cheese block prices usually bottom in March.

Grains - The USDA is surveying farmers over the next few weeks regarding 2020-21 planting intentions in the U.S., and the results will be released at the end of the month. Expectations are that corn plantings could be near a record high while soybean plantings should be bigger as well. The grain markets could be erratic in the near term.

 

Produce- The tomato markets have found support as of late. Poor weather in Mexico earlier this winter has shortened an already subpar tomato crop. But Florida supplies have been better than the prior year. Overall tomato supplies could remain limited during the next several weeks which would be supportive of the markets. History suggests that higher tomato prices could be in front of us. The large mature green tomato market has averaged above February in March in 10 of the last 11 years. But history also suggests that some tomato price relief could occur in April. Avocado supplies are tight.

 

Commodity Report

February 5, 2020

Beef- Cattle harvest continues well above year ago levels at more than 8% higher than same period 2019. Carcass weights are also running well above 2019 levels at 17 lbs heavier. Wholesale beef sales are strong, with out front contracts seeing the most activity. Despite the recent sell-off on the live-cattle futures, beef merchandising is expected to remain active into the late-winter and early-spring. Seasonally, beef prices are expected to move mostly sideways into mid-February before escalating into the early spring, but this years seasonal upside could be here earlier than historically. The stories and rumors regarding beef trade with China (or current lack thereof) continue to swirl around international markets. Imported 90s have plummeted from record levels of $310 to $315 in November to recent pricing in the upper $230s. While this is considerable price relief on a relative basis from the buy side, recent prices still are the highest for January since 2015. At the height of the international "buying frenzy" last fall, imported 90s were trading into the US at record premiums to domestic 90s. Currently, imported lean boneless beef is trading slightly below domestic product.

Pork- There are reports of the coronavirus delaying shipments of pork into China. In the short-term markets are expected to pull back. Hog harvest this past week surpassed 2.7 million. This is a 14% increase over prior year. Packers are likely pulling forward hogs to fill their production schedules, but were not looking for the strong year-over-year output gains to continue. We will be able to see over the next few weeks. Still, amid larger production, wholesale pork prices are rising, with bellies and hams leading the way. The USDA pork cutout is up more than 13% (yoy), but larger supplies may pressure prices lower later this year (Q4). Anticipate U.S. pork export interest to be robust, but the current coronavirus problem is casting some doubt on those expectations. Pork bellies dropped this week, one week ahead of forecast, and rather sharply, losing 10% in just three days. Bellies have two or three more weeks of further losses, but at the pivotal $100 level, some buyers may step in. There is still a chance that price could move down to $90 or below again. If that happens, the price would not likely last very long. Look for a softer pricing structure for the next few weeks, followed by strong gains coming out of the third week of February and then successively higher through March and April. The primal at $160 during last April is not on the radar again, as product preparedness this year is working hard to stave off the aggressive price ascension.

Poultry - Growth in daily harvest amid elevated bird weights resulted in 12.5% more ready-to-cook broiler meat production during December 2019 when compared with a year ago. Whole bird values continue to drift lower as demand is lower at the retail level ahead of Super Bowl. Softness is expected to continue for this segment, nearby. While data continues to suggest that near-term broiler production schedules will remain robust, producer margins are starting to fade amid struggling breast meat prices. In fact, breast meat prices have been fading counter seasonally throughout early 2020, and this week was the lowest for any week in Q1 since at least 2000. Longer-term contracting could be considered. Upside price action for wings and leg quarters have slowed, but strength should resume deeper into the winter.

Seafood- The salmon markets have been firm during the last several weeks due in part to smaller imports from Chile. During November, total U.S. salmon imports were up 2.1% from prior year with farmed filet imports up just .1%. Total salmon (10.7%) and salmon filet (5.4%) imports from Chile during the month were both lower than 2018. U.S. salmon imports could improve in the coming months. This may temper any seasonal upside in prices. Shrimp prices continue to trend above year ago levels. Tilapia, cod, and yellowfin tuna re tracking below year ago price levels.

Dairy - The spot butter market this week is the lowest in 39-months. Per the USDA, butter inventories in December were 5.9% larger than the prior year, but it was the smallest build for the month since 2016. Butter prices may still fall in the near term, but some long-term forward buying can be considered. The cheese markets are experiencing weakness, but cheese block prices are still historically inflated for January. Domestic cheese stocks on December 31st were down 2.2% from 2018 and it was the largest drawdown for the month since 1987, signaling solid usage. This years seasonal price declines for cheese may be tame.

Grains - The soybean oil and palm oil futures markets fell sharply last week due in a large part to consumption concerns in Asia. The coronavirus has dampened celebration events and food consumption for the Chinese New Year holiday. This week opportunistic buyers have stepped in and driven prices up.

Produce- The avocado market remains well supported. Demand is surging this week for the upcoming Super Bowl. Further, there was little to no growth in avocado imports from Mexico last week. History suggests that avocado prices may remain firm. The Hass 48 count avocado market has averaged flat to higher during February six of the last nine years. Tomato supplies from Mexico remain deficient. U.S. tomato imports last week were 15.5% less than prior year. Tomato supplies are expected to improve soon. Tomato prices have averaged below January during February in six of the last eight years.

 

 

Commodity Report

January 6, 2020

 

Beef- Following the fourth consecutive year of beef production growth, 2020 is expected to expand further, but escalating export potential may temper overall domestic beef availability. Still, production gains are forecast to outstrip exports and per capita beef consumption is may be at its largest since 2010. In response to the reopening of the closed Tyson beef processing plant, cattle harvests jumped to 682k head earlier in December, the largest weekly throughput for Q4 since 2002, and last weeks harvest remained active at 668K. Following the expensive holiday shopping season, ground beef prices tend to find support as a lower cost beef feature item, but given persistently elevated prices since the late summer, lackluster interest is being noted. Still, ground beef prices should find support later this month into mid-January.

Pork- The number of hogs through the system is expected to be record large again in 2020, as a significant portion of the hogs are already here, with feet on the ground. The last few years have seen continual records, quarter specific, and this next year is forecast for similar growth and pattern of hog availability. Last weeks hog slaughter came in at an estimated 2.81 million, a new all-time slaughter record, but active schedules are still anticipated into the first half of 2020. Pork belly prices continue to languish near the $1.00 mark, but price risk remains to the upside both seasonally, as well as on escalating export expectations. Pork 72s have started to decline and are back near 2018 levels. The upside risk for many pork markets is notable for 2020 as China is expected to increase import volumes from the U.S. Buyers should act when value presents itself.

Poultry - Despite little change in the total broiler-type hatching egg laying flock during the second half of the year the flock has been up as much as a 2.2% when compared with a year ago during the fourth quarter. Chicken production for the week ending December 14 moderated from the week prior but was 6.7% larger than year ago. Bird weights continue to hold near record levels and are adding pounds to production, leaving RTC supplies relatively available. Breast meat prices took a pause into the holiday week, and upside is expected to moderate with choppy trade likely from early 2020 into the late winter. The seasonal trend for wing prices in late December is usually higher. Strong output expansion is anticipated to temper price increases heading into the Super Bowl.

Seafood- The shrimp markets are mostly tracking above 2018s depressed levels but remain historically low. U.S. shrimp imports during October were just 0.7% better than the previous year. A large part of those imports originated in India which carried 43% of the trade. U.S. shrimp imports from India during the month were up 15% from prior year. Solid shrimp imports are anticipated to continue which could temper any price upside.

Dairy - After hitting the lowest level since November 2016 earlier this month, spot butter prices are finding support. The cheese markets have fallen sharply recently, especially barrels. Per the USDA, November milk production was up 0.5% year-over-year. The milk cow herd was 0.3% smaller than a year ago, but the USDA adjusted its October herd number up by 3k head. Novembers milk-per-cow yield was 0.8% better than a year ago, which is disappointing compared to the October milk-per-cow yield up 1.7% (YOY). Seasonally expectations are only for modest price declines from here for both cheese and butter.

Grains - The wheat markets have been erratic during the last few weeks as the trade adjusts to various supply concerns. Major wheat exporter, Argentina, recently boosted export tariffs on their wheat which could impact supplies during the next several months. The wheat markets may remain underpinned in the near term. Soybeans and soybean oil prices have been erratic recently with announcements of trade deals and the recent tension in the Middle East. Expect continued volatility in these markets.

Produce- Inflated Idaho potato prices are persisting due to adverse early fall weather negatively impacting the late harvest and storage supplies. As much as 30% of the crop could have been impacted. According to the USDA, December 1st potato stocks were down just 4.3% from the prior year. Still, they did match the smallest stock level for the date since 2011 and the quality of those stocks may be suspect. The USDA is expected to update their 2019 fall potato crop harvest estimate on January 10th with an historically small number expected. Erratic potato prices could persist.

 

 

Commodity Report

December 6, 2019

 

Beef- Last weeks holiday shortened production schedule came in below expectations as inclement weather tempered total beef output. This week is already off to a strong start, with two back to back days harvesting 120k head the largest daily totals noted since the pre-Holcomb Tyson plant fire days. With the Holcomb plant now back up and running, expect beef output to be robust. Production at the plant is being ramped up and should be at full speed the beginning of January. Beef prices are starting to fade, but seasonal upside pressure is expected to emerge for the end meats into late December. Additionally, the grinds are seeing escalating interest, but elevated pricing is projected to temper demand into early 2020. The imported 90s and domestic 90s markets have taken a sharp turn upward recently with strong retail ads and weak imports.

Pork- Last weeks hog slaughter schedule was down just 7% from last years non-holiday production week, and this week began with a record single day harvest. This was followed by a near record kill on Tuesday, and pork processors had to scramble to move product ahead of escalating inventories. African Swine Fever continues to loom over pork markets, but markets are generally following seasonal patterns. The pork belly market is struggling to find support near $1.00 per pound. Retailers are offering discounts on bacon. Belly export sales remain active, and price risk still exists to the upside. 72% pork trim prices are being supported by costly lean beef trim (90s) prices, but prices are expected to seasonally fade soon.

Poultry - Chicken production remains active, with output for the week ending November 23rd down modestly from the prior week, but heavy bird weights continue to support ready-to-cook (RTC) broiler supplies. Additionally, a continuation of escalating pullet placements into the hatchery flock is anticipated to support further chicken production growth well into 2020. Given the recent news regarding China accepting U.S. chicken, price risk remains to the upside. Chicken breast prices notched a seasonal low in early October, more than a month earlier than is seasonally normal. Leg quarter prices, as well, are edging higher, so anticipate longer term contracting opportunities for this item. Wing prices began to decline about six weeks ago and are now in a sideways pattern. Tender pricing has weakened over the same timeframe due to softened foodservice demand. Pricing risk on tenders is to the upside. Egg prices are showing strength and are now above YOY pricing levels.

Seafood- U.S. snow crab imports in September were solid, up nearly 8% from a year ago. But, like prior months, it is taking higher prices to bring in product as reflected in the markets below. The Alaskan snow crab fishing season is underway, but most of the quota is not anticipated to be landed until after the holidays. Expensive snow crab prices are anticipated to persist until demand backs off. But there has been little sign of that yet. The wild gulf shrimp season is in full swing. Initial reports are not positive for supply on both browns and whites.

Dairy - The spot butter market this week is the lowest in 37 months. Due to a strong buildup of inventories during late summer and fall butter stocks are adequate despite a record drawdown for the month of October. Butter prices have not been below $1.90 for a notable period of time since the winter of 2015. The cheese markets remain inflated, especially for this time of year. Domestic cheese demand has been solid for the holidays. The recent rise of nonfat dry milk prices is usually a supportive sign for cheese prices and may temper the seasonal drop that usually occurs in December. Since 2015, the average move for the cheese block market over the next four weeks was down 6.7%.

Grains - Weather, once again, has delayed the corn and soybean harvests in the U.S. as notable acreage is under snow cover. However, the markets arent concerned. The USDA will not make any acreage or yield adjustments to their crop estimates until January. The corn market could be range-bound until then. The soybean, corn and wheat markets are affected by several variables including export demand, trade policy, equities markets, crude markets, weather, and the strength of the US dollar.

Produce- The Idaho potato markets remain expensive, at record levels for early December. An early season freeze is estimated to have impacted somewhere between 20% and 30% of the crop. Storage facilities are holding inventory as the industry adjusts to a tighter supply situation. The downside potential may be limited in the potato markets for the next several months. This week it was reported that French fry shortages could hit the US. This is unlikely, but we will likely see higher pricing as producers move more potatoes from fresh markets into French fry production. Lettuce prices remain expensive due in part to the romaine recall last month. The Yuma-Imperial Valley region will produce the bulk of the domestic lettuce supplies this winter.

Commodity Report

November 5, 2019

 

Beef- Beef production edged modestly higher last week, up 0.1% from the prior week, and was 1% higher than last year. Better beef output comes as cattle harvests were up 0.8%, implying that carcass weights are heavier than a year ago. This may pressure the fat trim markets lower, but upside risk is still present for lean beef trim. The most recent monthly Cattle on Feed report continues to confirm larger heifer on-feed inventories, and, coupled with bigger beef cow harvests the past few years, it indicates that the U.S. cattle herd may have peaked. Usually, lean beef prices tighten after the cyclical peak as fewer cows are available.

Pork- While mostly steady week-over-week pork production continues, output is escalating from a year ago, up nearly 5% last week, and is on track to meet the USDAs Q4 5.5% production forecast (YOY). More active production has not yet been able to lower prices, with the USDA pork cutout holding near par with last year. Despite the additional production ribs, picnic hams, and butts being at or costlier than year ago levels. Pork bellies have struggled lately with prices near the $1.10 price area heading into November. Still, theres upside price risk for the pork markets due to possible African Swine Fever global demand changes.

Poultry - The weekly chicken harvest for the week ending October 12th was 3.8% more than prior year. Record heavy bird weights continue to add pounds to total production numbers. Ready to cook chicken output was up 5.8% (YOY) which boosted the six-week average of production to 6.5% better than a year ago. Chicken breast meat prices continue to struggle but appear to be putting in a seasonal low. Chicken wing prices look vulnerable from their October tops. Look for lower chicken wing markets heading into December ahead of typical increases that occur from late December into early February. Leg quarter pricing are fading as well and should decline further during early 2020.

Seafood- The Alaskan Bering Sea snow crab fishing season has been underway for two weeks, but no considerable tonnage had been landed as of yet. This is not unusual during the fall as the bulk of the snow crab quota is typically landed after the holidays. This years Alaskan Bearing Sea snow crab quota is 34 million tons which would be a four-year high. Still, elevated snow crab leg prices are expected to persist into next year. Shrimp market pricing continues to track well above 2018 levels. The higher pricing encourages more imports. Salmon filet pricing is showing a slight decrease (YOY).

Dairy- The cheese markets are at levels not seen since 2014. Only modest milk production is supporting cheese prices. September milk output was up 1.3% from last year despite the dairy cow herd being down 0.5% (YOY). The milk per cow yield was up 1.8% from 2018, but it was the best year-over-year monthly gain since January 2017. Cheese purchases should be limited at these inflated levels as seasonally lower prices are anticipated to occur soon. Butter prices found modest support since last week, but exports remain lackluster. Butter prices can be choppy during November but typically fade lower in December.

Grains - The wheat markets have firmed slightly. Short crops in Canada as well as expectations for smaller winter wheat plantings in the U.S. have brought support to the markets as of late. Durum wheat price could be the most volatile in the near term as Canada is a major supplier to the U.S. But the upside in the other wheat markets may be limited. The November USDA crop progress report is due out later this week. Usually not an important report this year we may see some adjustments to ending stocks, crop progress, and yields.

Produce- The potato markets have jumped in recent weeks due to cold temperatures impacting the final harvest and yields. As of October 27th, just 4% of the Idaho potato crop remained in the ground. Still, storage shipments have slowed. This may support potato prices in the near term, with some relief anticipated thereafter. The tomato markets remain costly due to a shortage in supplies from California and Mexico. Shipments from these two origins last week were 29% less than prior year. History indicates inflated tomato prices could persist.

Commodity Report

October 2, 2019

 

Beef- For the week ending September 14 estimated overall beef production fell to 529 million pounds and was nearly nine million pounds below the same week last year. Recent fed cattle carcass weights have been mixed with slightly lower steer weights but higher heifer weights. Weights will likely continue higher seasonally and still are forecasted to move higher than last years levels soon. Slaughter rates are expected to pullback seasonally in October. 2019 beef grind pricing has been mostly been running above year ago due to increased retail marketing. These ads tend to taper off after Labor Day, and lower pricing should follow but remain above year ago levels. Choice short loins and strip loins dropped sharply last week while Select cuts only moved modestly lower. This helped to close some of the Choice/Select spread, but the spread remains historically high. Further downside is expected between now and the end of November.

Pork- The September 27 Quarterly Hogs and Pigs report was mostly in line with expectations. Total hog inventory was reported at 77.7 million hogs, which is 3.38% higher than last year and at record levels. Producers indicated their intent to slow the growth of herd expansion over the next few quarters. The US and China continue trade negotiations. In the meantime, China has agreed to allow additional pork purchases from the US in the short term. Recent increases in cash prices reflect higher buyer interest. Belly prices had been falling until last week when markets bounced higher. Seasonal strength is expected over the next few weeks. Both spareribs and backribs are currently in a sideways pricing pattern and are currently at yearly lows. This is often a good opportunity to contract ribs.

Poultry - The chicken production forecast for the remainder of 2019 remains poised for moderate growth. Q3 harvest is forecasted to be up nearly 4% while Q4 is expected to be up 0.5% (YOY). Live weights have continued to show growth but are expected to begin a seasonal pullback this month. Chicken breast meat prices have been falling in recent weeks due to sluggish retail demand and strong production numbers. Prices are expected to continue drifting lower through October and November. Chicken tender pricing remains firm due to strong foodservice demand. Wing pricing remains strong but growing inventories suggest seasonal demand (football season) may not have a significant on price levels.

Seafood- Shrimp market pricing is tracking well above 2018 levels. The higher pricing encourages more imports which were recently reported up more than 8% (YOY). This is helping to keep prices from going even higher. Salmon filet pricing is showing a slight year over year pricing decline. Cod prices are up about 10% (YOY).

Dairy- After climbing to near 5-year highs both the barrel and blocks markets have recently begun a pricing pullback. Cheese inventories rose slightly in August, which is not a common occurrence for that month. Historically cheese prices show some softness in the fall. Butter pricing has been choppy. Seasonal demand for butter often pushes prices up, but increasing butter stocks may help to temper those increases. Prices should trend lower after the holidays.

 

Grains- 2019 soybean and corn exports have been tracking significantly below 2018 levels as the US and China are locked in a trade war. This has kept a lid on price levels as spring flooding during planting and early fall frost during harvest have had tangible impacts. Markets are watching any potential for a US/China trade deal. If/when that happens expect market pricing to increase.

Produce- The fall potato harvest has seen some delays due to unfavorable weather. The harvest is currently about 10% behind 2018 levels. Expectations are for potato inventories to improve over the next few weeks. Mexican lime imports are currently down over 20% (YOY) and this is causing pricing to be more than double last years pricing.

Commodity Report

September 3, 2019

 

Beef- Fed cattle carcass weights continued seasonally higher for the week of August 17. The weighted heifer and steer average increased four pounds week-over-week. Further increases are expected as fed inventories become less current. Estimated harvest for the week came in near the forecasted level of 644,000 head. This is just under the same week last year. Estimated beef production fell from the prior week to about 522 million pounds and was about one percent below a year ago. Weekly slaughter levels relative to capacity are expected to drift lower in the near term. In the aftermath of the Tyson beef plant fire in Kansas and the disruptions in production and delivery of commitments, wholesale prices on grinds have jumped sharply upward, to the highest levels since the Memorial Day period in 2017. Prices are beginning to pull back, but even with significantly lower prices projected over the next several weeks, prices could remain well above year ago levels, with year-over-year price gains being the trend so far this year.

Pork- Over the past four to five weeks the national lean hog price has declined sharply. Futures markets tell a different story. The market continues to evaluate the forward pork needs in Asia, realizing if forecasts come to reality for hog losses on account of African swine fever, then demand for US pork into next year will be robust. This is the same sentiment placed into the futures market earlier this year, in anticipation for current pork demand. While it has not materialized yet, to the degree some expected, the futures board is again placing bets it will happen starting first quarter 2020. Bellies experienced a strong, seasonal price correction this week, responsible for most of the losses on the cutout. For Pork Butts there is a very decisive, seasonal price wave expected through September, as product is prepared to move in October. Prices are expected to increase successively throughout September.

Poultry - At 80.88 cents per pound, 2019s July average for the USDA national composite whole broiler/fryer index was the lowest same month average since 2011. The July average came in well below analysts expectations and represented a 7.5 percent discount when compared with a year earlier. There was a strong sell-off of product ahead of Labor Day, which provided a three cent per pound decline from the previous week. The national composite whole broiler index was not entirely reflective of market conditions, or ranges throughout the country as prices varied widely. Although the market rally that typically occurs during the November-December timeframe was dampened a year earlier as boneless/skinless breast meat prices were at all-time lows, and discount to line-run breast meat which encouraged feature activity for boneless skinless breast meat at a time when support typically occurs for line-run breast meat. Boneless/skinless breast meat averaged roughly 104 cents per pound in Northeast markets this week. Seasonal softness dictates further declines nearby, however the risk is with respect to competing protein availability, specifically with respect to ground beef, which has been a much stronger competitor for boneless/skinless breast meat this summer than has been the case in recent years. Wings were largely priced at a discount to the prior week in Northeast markets this week, according to the USDA. Prices are expected to be firm nearby, with risk to the low side of the forecast over the next couple of weeks, then higher as seasonal support returns to tight spot availability during late September and early October.

Seafood- Salmon markets continue to be priced roughly 8 percent higher than last year despite strong imports (up more than 5 percent YOY). Imported shrimp prices are seeing relief in smaller sizes (26/30 and smaller), but larger shrimp are seeing some year-over-year higher prices. US seafood imports are expected to remain strong. The snow crab leg markets remain historically expensive and are forecasted to remain higher at least through the end of the year.

Dairy- The spot butter market declined sharply this past week, hitting the lowest level in eight months. July 31^st butter stocks were 3.6 percent higher than in 2018, and it was the second best build for the month since 2004. Butter prices tend to rise modestly in September but typically average 12 percent lower in Q4. Cheese block prices have remained firm, but cheese barrel prices have weakened. Since 2014, cheese block prices have averaged 14.3 percent lower in December versus the prior September.

Grains- The feed markets have continued to trade well off their highs made earlier this summer. Recent crop surveys have been close to USDA estimates which point toward sufficient supplies. Recent market trades have been in a sideways pattern as weather becomes the news that is followed along with global trade wars. Major changes in these two areas will move the markets, but until then forecasts are for steady markets.

Produce- The tomato markets have firmed. Shipments improved last week by almost 9 percent versus the same week a year ago. The US has reached an agreement with Mexico on tomatoes which is expected to officially execute on September 19^th. This agreement should lift the tariffs on Mexican tomatoes just before the seasonal surge in supplies, but the rate of product inspections is expected to increase significantly also. Part of this agreement is to raise the floor price on which tomatoes can be imported. Lime pricing recently spiked on a severe drought in the Mexican state of Veracruz, the region responsible for growing a majority of Mexican limes. Russet Burbank potato pricing has also recently spiked to almost double 2018 prices due to potato sizing concerns with the 2019 crop. This directly affects French fries, bakers, mashed potatoes, etc