Business Insights

August Market Outlook

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Beef

General Comments

Boxed beef “should” seasonally retreat into September. But beef demand continues to be quite good and margins for packers and retailers are excellent. Consequently, packers and retailers alike have been comfortable with the elevated production levels and pricing this summer.

Loins

Top Butts: Both choice and select prices were mostly steady this week. Select Butts have held their value throughout the year, and current prices beat seasonally average pricing. Fortunately, both choice and select price trajectory is moving in accordance with the seasonal decline. Short Term: Steady to lower pricing.

Strips: The cost of Choice strips was largely unchanged this week, while Selects retreated back toward seasonally average pricing. We should prices continue to taper off slowly moving into the fall. Short Term: Steady to lower pricing.

Tenderloins: Choice values ballooned this week, and price movement for selects was minimal. Seasonal trends indicate that prices will likely appreciate throughout the months of August and September, but both Choice and Select tenderloins remain value buys. Short Term: Steady to firm pricing.

Tri-Tips: Choice and Select prices saw declines this week. Select prices mirror year-ago bargain levels, while Choice prices are marginally higher than they were last year. Short Term: Steady pricing.

Ribs

Ribeyes: The market for Ribeyes firmed up this week, as both choice and select prices advanced. Prices for choice ribeyes usually advance during this time of year, but select prices do not. Short Term: Steady to firm pricing.

Chucks

Chuck Rolls: Choice prices held their ground, and selects declined slightly this week. Current prices are above seasonal averages, and should increase heading into football season. Short Term: Firm pricing.

Teres Majors: Choice costs softened up this week, and are moving in accordance with the seasonal decline heading into the fall. Conversely, select prices moved against seasonal trends and climbed slightly. Short Term: Steady to lower pricing.

Briskets: The brisket market moved dramatically higher this week. Both choice and select prices climbed substantially – moving against seasonal trends. The market for brisket is usually flat this time of year, and prices are expected to hold their current values through the fall. Short Term: Steady pricing.

Thin Meats

Ball Tips: Select prices skyrocketed, and choice values increased moderately this week. The ball tips market usually declines during the summer and fall, but price movement this year has steadily increased. Fortunately, select ball tips still hold great value despite the price hikes. Short Term: Steady to firm pricing.

Flap Meat: The flap meat market continues to move against seasonal tendencies. Select prices advanced again this week, and choice prices maintained their strength from last week. Prices typically decline moving further into the summer and into the fall, and we should see prices begin to stabilize now that they’re well above seasonal averages. Short Term: Steady to firm pricing.

Skirt Meat: Skirt meat values were steady this week. Choice and Select prices have maintained their value throughout the summer when they typically decline. Consequently, current prices are above seasonally average pricing. Short Term: Steady pricing.

Flank: Flank meat values dropped significantly this week, and moved in accordance with seasonal trends for the first time in three weeks. However, the popularity of flank meat has pushed prices well above seasonal averages. Short Term: Steady to lower pricing.

Rounds

Peeled Knuckles: Peeled knuckle values declined again this week in accordance with seasonal tendencies. Both choice and select peeled knuckles hold great value as they are now lower than last year’s levels and seasonal averages. Short Term: Lower pricing.

Inside Rounds: Choice prices were mostly steady, but saw some softness at the end of the week. Conversely, select prices strengthened at the beginning of the week, and found stability in the middle of the week. Prices should be steady to weaker in the near future. Short Term: Steady pricing.

Bottom Round Flats: Select prices sprouted upward this week while choice values tapered off just a bit. Bottom round flat prices typically appreciate from the second week of August through Labor Day and the month of September. Short Term: Steady to firm pricing.

Eye of Rounds: Pricing on Eye of Rounds marginally increased again this week. The price increases are in accordance with seasonal trends, and value can be found in both choice and selects as both remain cheaper than seasonally average prices. Short Term: Steady to increasing.

Grinds

Fresh 50s edged higher again this week, while prices on fresh 90 remained steady. Currently listed prices for fresh 50s mirror last year’s prices for this time of year, and fresh 90 prices remain below last year’s price levels. Seasonal tendencies indicate that pricing on fresh 50s should remain steady, but fresh 90s should gradually decline heading into the fall. Short Term: Steady to lower pricing.

Poultry

General Comments

Broiler-Type Eggs Set in the United States Up Almost 1 Percent –Although the weekly eggs hatched performance is still down in comparison to two years ago, conditions appear to be improving slightly. Egg sets are anticipated to continue to climb by 2% to 3% in the coming weeks and current egg sets would be ready for harvest in October.

Weekly RTC Production – Reported at 795 million pounds, which represents a 4% increase from last year’s levels. Furthermore, the number of broilers processed was up 3.1%, and broiler weights were up 0.8%. This is the third week in a row that an increase in broiler harvest has been reported.

Wogs

Whole Bird and WOG markets continue to move lower as a result of increased production and availability. Short Term: lower pricing.

Breast Meat & Tenderloins

Breast meat and tenderloins dropped again this week. Coupled with projected increases of production prices will continue to be pressured. Short Term: Steady to lower pricing.

Wings

The Wing market continued to strengthen slightly at the beginning of the week. Historical trends suggest a steady to firmer market through the upcoming football season. Short Term: Steady pricing.

Thighs

Thigh prices took another step back this week. The gradually sinking cost of thighs and dark meet can be attributed to the lagging export market and the unknown future of possible tariffs. Short Term: Steady lower pricing.

Turkey Whole Birds

The market for whole birds was steady with a weaker undertone this week. Some are interpreting mildly lower offerings as a sign of seller confidence, while others see it as sellers coming to terms with the current market conditions. Short Term: Steady to lower pricing.

Turkey Breast Meat

Breast meat prices held firm this week. Sellers are actively seeking export routes for their frozen breast meat because they are finding more value in foreign markets than domestic markets. Short Term: Steady firm pricing.

Pork

General Comments

Total pork production for the week ending August 11th, 2018 was estimated at 482.8 million lbs. This was .4 percent above the previous week and 2 percent over last year. Average live weights, at 277 pounds, were even with last week and last year.

The USDA recently reduced their forecast for pork production in the second half of 2018 due to a slower expected pace of slaughter. For 2019, the pork production forecast was raised from the previous month on higher expected hog slaughter in the first part of the year and heavier carcass weights.

Loins

Loin prices were steady with a stronger undertone this week. Seasonal trends suggest prices will maintain their strength through Labor Day, and gradually taper off through the year’s end. Short Term: Steady pricing.

Tenders

Prices slid this week in accordance with seasonal trends. Current tenderloin prices represent a great bargain-buy, as they are the lowest they’ve been since 2016 and are well below seasonal averages. Short Term: Steady pricing.

Butts

The weekly average market cost for Pork Butts was steady with a weaker undertone this week. Current prices reflect last year’s prices, and they should strengthen after Labor Day. Short Term: Steady pricing.

Belly

Pork Bellies continued their rapid downward slide this week. Given the current market conditions and seasonal tendencies it is expected that belly prices may continue to move down although not so dramatically. Short Term: Softer pricing.

Ribs

Backrib prices dropped this week, and reflect year ago prices. Sparerib prices climbed slightly this week, but remain below year ago, and seasonally average levels. Even though sparerib prices are likely to continue their appreciation, they’re likely to remain as bargain buys. Short Term: Steady to lower pricing.

Hams

Hams did turn directions this week and moved down this week. Prices should continue to hold around these levels. Hams still represent a great value compared to previous years. Short Term: Steady pricing.

Diary

Butter

Butter production is still limited throughout much of the United States. Most of the demand for butter is being driven by the food service industry, as demand from retailers is light during this time of year. In the Central Region, some processors are micro fixing cold storage bulk stocks to produce butter instead of churning cream. In the West, the higher temperatures and demand for ice cream have enticed producers to begin selling their cream back onto the spot market. Lastly, Northeastern production is mixed depending on location, and some manufacturers are churning at marginally higher rates. Short Term: Steady firm pricing.

Cheese

Cheese production is active nationwide, and milk inventories are more than adequate for production schedules. Demand is mixed by variety and region, but the demand for pizza cheeses is increasing as we head into football season. Northeastern cheese producers are operating at usual levels, and have noted that demand for Mozzarella cheese has increased while demand for Cheddar and Provolone cheeses is steady to increasing. In the Midwest, production is steady and the demand for cheese curds is increasing. Producers in the Western region are active as milk levels remain sufficient for all processing requirements. Some manufacturers have noted that production schedules are steadier than they were a week ago. Short Term: Steady to firm pricing.

Shell Eggs

Retail demand for shell eggs continues to range from fair to good which has resulted in price firming for the week. Short Term: Steady to firm pricing.

Milk & Cream

Milk production was steady to weaker this week. Production in the Western region is heavily mixed as production levels are down in California, Arizona, and New Mexico, but remain strong in the Pacific Northwest and Mountain states. Midwestern and Eastern milk production is also regionally mixed, but steadier than it is in the West.

Cream supplies are mixed by region, but are still relatively low. Demand for ice cream in the Western region has picked up, and held cream prices firm in the region. Producers in the Northeast have noted that the demand for cream is starting to slow down, and we might finally see some easing in the future. Short Term: Steady pricing.

Seafood

Shellfish & Shrimp

Shrimp: The import market was unchanged this week. It’s been reported that discounting has become less prevalent, and market sentiments are beginning to firm up. However, Brown Shrimp production in the Gulf of Mexico is ramping up and causing some seasonal downward pressure.

Farmed White: Premiums developed on the smaller 21-25 count shrimp as a result of limited availability for HLSO shrimp. Fortunately, the remainder of the farmed white shrimp market is steady.

Farmed Black Tiger: The elevated demand for larger shrimp continues to support prices, and premiums have developed on 6-8 and 13-15 peeled and deveined tail-on black shrimp.

Wild, Gulf of Mexico: Availability for brown shrimp is increasing as a result of Texas fisheries’ operations, which has caused some easing on prices this week. But, availability remains tight on the largest count sizes. Consequently, prices on the larger count sizes has held steady.

North American Lobster: Prices are unchanged this week, but many Alaskan fisheries have voiced their concerns about the effects of the 25% tariffs imposed on U.S. seafood.

Warm Water Lobster Tails: Reports suggested that initial Brazilian imports were bought up faster than normal, and buyers are waiting on additional supply to come in. As a result, the market for warm water lobster was firm this week.

Live Lobster: Hard Shell prices climbed, while New Shell prices fell. The divergent price movement was caused by the diminishing supply for Hard Shell products, and the increasing supply levels for new shell products.

Scallops: Concerns about limited availability for U/10 count scallops resulted in premiums developing in the market this week. Short Term: Firm pricing.

King Crab: Supply levels are currently tight, and are expected to remain that way for the foreseeable future. Short Term: Steady firm pricing.

Snow Crab: Prices on 5-8s adjusted lower this week, and the market may be softening on 8+ as sales activity is reported as dull with adequate supply. Short Term: Steady to weaker pricing.

Crab Meat: The blue swimming crab meat market moved lower on colossal, jumbo lump, and super lump meat. The declining prices can be attributed to slower than normal sales activity. On the other hand, the market for red swimming crab meat remains firm as we approach the opening of the Chinese season.

Finfish

Salmon: The West Coast Whole Fish market is steady on smaller sized fish, but firm on all 12+ size fish. The Northeastern Whole Fish market is unchanged this week, as supply levels are adequate for moderate sales activity. The Chilean Whole Fish is also unchanged, and supply and demand conditions mirror the Northeastern Whole Fish market. Lastly, the Norwegian Whole Fish market continues to move lower by the day.

Atlantic Cod: The 25% reduction on quota compared to 2017 out of the Newfoundland and Labrador regions in Canada has, and will continue, to hold prices firm. Short Term: Steady firm pricing.

Pacific Cod: Prices are expected to hold firm until Alaskan fishing season opens up in January due to the tighter than normal supply and elevated replacement costs. Short Term: Steady firm pricing.

Pollock: 1x frozen prices softened unexpectedly this week, and 2x frozen prices held steady. Many anticipated consumers to “switch” from the more expensive Cod to the cheaper Pollock, but that change never materialized. Short Term: Steady to weaker pricing on 1x; Steady to firm pricing on 2x.

Basa: The market was steady this week despite news that monthly imports were down for the first time since February. Short Term: Steady pricing.

Catfish: Prices will continue to hold steady at currently listed levels for the foreseeable future. Short Term: Steady pricing.

Whole Fish Tilapia: Prices will remain firm until production picks back up later this year. Short Term: Firm pricing.

Mahi Mahi Fillets: Prices for Mahi filets trended lower due to higher inventory levels and sluggish demand. Short Term: Steady to weaker pricing.

Grains & Oils

Grain & Crop Summary

Soybeans traded solidly higher Thursday on reports a low level Chinese Vice Commerce Minister will visit the U.S. in late August to resume trade talks, the first official actions in two months. However, these are seen as preliminary discussions to possibly get the ball rolling again, but are not seen as the type of meetings in which any real progress on actual trade issues will be made. Chinese soybean and soybean meal futures were lower Thursday night as a result, as well.

U.S. corn and soybean crop conditions both declined by 1% in good/excellent last week, with corn now at 70% good/excellent vs. 62% at this time last year and soybeans at 66% vs. 59% last year. Spring wheat conditions improved 1% to 75% good/excellent vs. market ideas for a 1% decline. In terms of progress, corn continues to rapidly advance with 26% of the crop now denting vs. 12% last week and 13% last, while soybeans are 84% setting pods vs. 75% last week and 72% average. Spring wheat harvest is now 35% complete, jumping from 13% last week, and ahead of average of 27.

Soybean Oil

U.S. processors crushed a bigger-than-expected 167.733 million bushels of soybeans during July, their second largest monthly total ever, National Oilseeds Processors (NOPA) reported on Wednesday. Strong profit margins, stemming from low soybean acquisition costs, encouraged processors to boost their crushing pace during the month. NOPA members handle about 95 percent of all soybeans processed in the United States. Soybean oil stocks eased to 1.764 billion pounds by July 31st from 1.766 billion pounds a month earlier. Analysts, on average, had forecast soybean oil stocks would rise to 1.783 billion pounds. This is friendly for soybean oil prices.

Canola

Canola prices were range-bound during the past week, although the looming harvest for both canola and soybeans could weigh on values going forward. The November canola futures contract held above the psychological C$500.00 per-metric-ton level all week, which should be providing decent opportunities for extending coverage. The driver for canola prices is soybeans and the spread between soybeans and canola is at historically wide levels. Canola is relatively expensive compared to soybeans. With the bulk of the canola harvest approaching “we can often see a little Seasonal weakness comes into play. What independent strength canola has is stemming from concerns over heat and dryness in parts of the Prairies, although anecdotal reports were still pointing to average yields overall. This is neutral/friendly for canola oil prices.

Palm Oil

Malaysia cut its export tax on palm oil to zero for September vs. the 4.5% export tax rate in effect for August as a result of its monthly adjustment process based on the calculated monthly reference price, which dropped below the 2,250 ringgit/ton ($550.00/ton) level that triggers an export tax. This is neutral/friendly for palm oil prices.

Produce

Oranges

Domestic California Valencia orange supplies are tightening, especially 113- and 138-count sizes. Markets are expected to rise next week. An industry-wide shortage of domestic Valencias is expected to occur by mid-August; offshore Navels will be supplemented as needed to fill all orders.

  • Markon First Crop and Markon Essentials Valencia Oranges are sporadic; packer label supplies are being substituted as needed
  • Offshore oranges will be necessary to meet summer and fall demand once school orders return to the market
    • Offshore oranges are increasing on both coasts
    • Imports are dominated by 88-count and larger sizes as well as fancy grade; fruit will have PLU stickers
    • Prices are higher than those for domestic Valencias
  • Early Texas Navels will be available in September
  • Mexican oranges will be on the market in November
  • Domestic Navels are forecast to be available in October

Limes

Markon First Crop and Markon Essentials Limes are available. Markets continue to rise due to tighter supplies reduced by weather and increased demand. Quality problems remain a concern; Markon recommends ordering for quick turns.

  • Temperatures in the mid-90s and forecast rain over the next 10-14 days are causing quality issues and shortening shelf-life
  • Growers in Mexico are experiencing reduced yields due to heat- and rain-damaged fruit
    • When product arrives into South Texas and receiving points across North America, breakdown, decay, stylar, and yellowing are more prevalent than normal
    • Suppliers are re-packing and sorting limes prior to shipping, but heavy cull rates are resulting in fewer limes on the market
  • Loading delays may occur due to longer repack times
  • The current lemon shortage has shifted demand to limes, creating a demand-exceeds-supply market

Lemons

Lemon prices remain elevated; supplies are limited. Substituting sizes, grades, and country of origin will aid in order coverage; lead-time is highly encouraged.

  • Markon First Crop and Markon Essentials Lemons are limited; packer label is being substituted as needed
  • High temperatures in California’s coastal growing region have affected quality, shortening the season as well as bringing possible long-term effects for next season
    • Many ripe lemons and blooms for next season have dropped from the trees
    • Shelf-life is shorter than normal due to extremely hot growing conditions during the summer months
  • Major suppliers in the California coastal region have declared a “Force Majeure” (Act of God) on current 2018 contracts
  • Limited quantities of Chilean and Argentine lemons are available
  • Sporadic supplies of fancy grade, Mexican-grown lemons are available (into California and South Texas); rain has delayed some Mexican harvests, resulting in fewer crossings
  • Stocks are expected to remain extremely limited through September, when the Arizona/California desert season begins

Avocados

Avocado prices continue to rise; supplies are limited, especially No. 2 grade fruit. Expect elevated markets until Mexico’s fall crop starts in September.

  • Growers in Mexico have transitioned to the summer crop; often known as the Flora Loca bloom (crazy bloom) as the maturity level vary each year
    • Supplies are mainly No. 1 grade; No. 2s are scarce
    • Size structure is dominated by small fruit (48-count and smaller); large sizes are tighter (40-count and larger)
    • Fruit is taking longer to ripen due to a lower maturity levels and oil content
  • The 2018 California season is wrapping up
  • Peruvian import stocks will remain available through September; size is dominated by 48-count and larger fruit
  • Overall availability will be limited into September

Broccoli

  • Markon First Crop (MFC) Broccoli Crowns are available in Mexico (into South Texas) and Salinas, California
  • Some Salinas Valley growers have experienced gaps in their planting schedules, creating a subtle disruption in the supply chain
  • Volume will increase over the next few weeks, stabilizing markets
  • Expect stronger prices this week

Iceberg Lettuce

  • MFC Premium Iceberg Lettuce is available; Markon Best Available is being substituted as necessary
  • Quality is good: harvesting crews are trimming leaves to remove mildew damage
  • Expect moderate supplies and strong demand through next week

Highlights

  • Markon First Crop® (MFC) Premium Green Leaf Lettuce weights are higher on average than the rest of the industry (23 to 26 pounds compared with 21 to 24 pounds).
  • An industry-wide shortage of domestic Valencia oranges is coming soon; offshore Navels will be supplemented as needed to fill all orders.
  • This summer’s hot weather has increased heat-related defects in Salinas Valley crops.

Produce Highlights

Broccoli

  • Expect stronger broccoli prices. Supplies will increase next week, causing markets to stabilize.
  • Some Salinas Valley growers have experienced gaps in planting schedules, creating a subtle disruption in supplies.

Limes

  • Prices are climbing due to tighter supplies reduced by wet weather and increased demand.
  • Breakdown, decay, stylar, and yellowing are more prevalent than normal.

Onions

  • MFC Red and Yellow Onions from California and New Mexico will be available through this week.
  • MFC Red and Yellow Onions from the Northwest are on the market.

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