Top of Mind News
Chicken production for the week ending June 23 rd was up 3.4% from the prior week and was 4.2% better than the same week last year. Average bird weights were 3.3% heavier than 2017 despite the recent warm temperatures. Chicken producer margins have improved with the recent decline in feed costs. This should encourage chicken output gains in the coming weeks. The chicken wing markets have likely found a seasonal bottom with the ARA Chicken Wing Index climbing 11.2% during the last 13 business days. Still, wing prices are the lowest for this time of year since 2014, which should boost demand. Since 2013, the average move for the ARA Chicken Wing Index over the next 13 weeks was up 8.7%. Table egg prices are trending upward.
Beef production last week fell 2.5% but was only .6% bigger than the same week in 2017. However, year-to-date beef output was running 3.5% better than a year ago. Abundant cattle supplies are projected to equal solid year-over-year gains in beef production during the next several months. Beef demand usually weakens after the Independence Day holiday. Most of the beef markets have seasonally peaked, and history suggests that further downside potential is possible in the nearing weeks. Last year, the loin complex declined 10% during the next three weeks. The average move for the 81/19 ground beef market during the next five weeks was lower by 6.7%.
Pork output last week increased 2.9% and was 3.7% more than the same week last year. Hog slaughter was a three-week high. Even better pork production levels are anticipated soon. The USDA is forecasting Q3 pork output to increase from Q2 by 1.9% and to be 4.2% larger than last year. Lower pork prices are anticipated later this summer. Sparerib supplies are in better shape than a year ago. Since 2013, the average move for the sparerib market during the next four weeks was down 18.3%. The pork belly markets usually peak in late July.
The Canadian snow crab fishing season is entering its final stages with north of 85% of the Newfoundland snow crab quota landed last week. Due to the decline in both the Newfoundland and Gulf of St. Lawrence snow crab quotas this year, world snow crab supplies are expected to remain tight into 2019 which should underpin the markets.
The potato markets remain firm. Supplies are seasonally limited with the major fall harvest not set to get underway until late August. The Idaho potato crops are progressing nicely. As of late June, 95% of the Idaho potato crop was rated in either good or excellent condition. At least 75% of the crops in Oregon and Washington were rated the same. This could help mitigate any seasonal price increases for potatoes during July. The tomato markets could remain somewhat erratic due to crop region transitions northward.
The Kitchen Sink
The cheese markets have struggled in recent weeks with cheese barrels declining to multi-year lows. Mexico recently implemented a tariff on imports of U.S. cheese and is scheduled to raise that tariff later this week. This could temper any seasonal upward moves in the cheese markets during the next several weeks. U.S. butter is also subject to various tariffs but continues to trade well below European price levels. Thus, fairly solid exports could persist which should temper any downside in the butter markets this summer. Engaging nonfat dry milk prices are likely to endure.
The USDA recently updated their 2018 domestic oilseed and grain acreage estimates boosting acres for corn, soybeans and wheat. The available corn supply is still anticipated to tighten which could dampen the downside in corn prices for the next several weeks. Soybean and corn stocks are expected to tighten as well.
Natural gas prices have fallen recently after hitting a headwind at the important $3.00/MMbtu resistance level. This, despite total U.S. natural gas stocks as of last week being 26.2% smaller than a year ago. The $2.850/MMbtu level is key support.