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For the week ending May 11th, chicken production was steady with the week prior, but up 1.3% from a year ago. Bird weights remain elevated but are expected to decline during the summer. In the interim, heavier weights have kept ready-to-cook (RTC) chicken output up 2.4% (yoy), and the six-week average is 1.1% over last year. Producer margins remain good, but recently rising corn prices may put a dent in profitability later this year. Still, production is slated to expand, and chicken prices are forecast to be lower this summer. Chicken wing prices remain elevated for this time of year but are below the $1.90’s. Expect lower wing prices during the summer months.
Last week, beef production eased, falling 1.9% below the week prior and .5% under last year. Spot beef sales (delivered within 21 days) were robust throughout early-May, and expectations are for active beef features to be present through the Memorial Day weekend. Ribeyes, tenderloins, and T-bones, as well as ground beef are popular promotional items, and are likely to head higher into June as fill-in buying occurs. But weaker beef prices are likely during the dog days of summer. A typical seasonal decline for the Choice cutout from mid-June into the late summer is 16.5%. This year’s decreases may be more modest, however.
Last week, domestic pork output edged 1.3% higher from the week prior and was 2.1% bigger than last year. Production is in its seasonal lower mode and sometimes can extend into mid-July. The USDA pork cutout has been pricing mostly sideways over the past two weeks but usually increases in accordance with lower production schedules. Following a move into the $1.60’s this past March, belly prices have struggled to regain upward traction this spring. Still, a price move towards the $1.80’s for pork bellies is expected before the usual late summer decline.
Elevated price levels and a strong value to the U.S. dollar are encouraging salmon imports. During March, the U.S. imported 3.2% more salmon than the previous year. Imports of Atlantic salmon filets were up by 8.2%. Fairly solid salmon imports are anticipated to persist during the next few months which could temper the upside potential in the salmon markets.
The tomato markets continue to trade at relatively engaging levels despite the new tariffs on imports of product from Mexico. Shipments from Mexico last week fell 23% from the previous week and were 26% less than the same week last year. Eventually the tariffs on tomatoes are expected to shorten the available supply, especially as imports seasonally increase during the fall and into the winter. Lettuce prices have been fairly attractive as of late as well, as the harvest tracks near year ago levels. Still, the risk in lettuce prices is to the upside.
The kitchen sink
The cheese markets have been steady. The butter markets have fallen modestly since last week. U.S. milk production during April was up .1% from the prior year due to a 1.1% increase in milk per cow yields despite a 1% smaller dairy cow herd. Milk farmers reduced the herd by 1k head making it the smallest since June 2016. Margins have improved however which should boost milk production gains later this year. Cheese prices typically trend upward during the next three weeks. Since 2014, the average move for the spot butter market from now through early July was up 5.9%.
Spring planting progress remains a concern for the grains. As of May 19th, just 49% of the corn crop was sowed which is the slowest pace on record. Expectations now are that somewhere between two and four million corn acres will not get planted which could tighten the available supply. Volatile corn prices are likely in the near term.
After hitting the highest level in six months during April, nearby WTI crude oil futures have fallen 6.9% from that point. Despite OPEC staying true to their oil production cuts, U.S. crude oil output remains historically high. But, growing geopolitical tensions in the Middle East could support crude oil prices from here.