Business Insights

July 2019 Market Outlook

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Beef

Prices will maintain a softer tone over the next few weeks as strong beef production by U.S. packers will continue to increase available supplies of product in the market. Packer gross margins are currently estimated at $400/head; given the ample supply of cattle-on feed, producers are incented to keep the flow of production at an elevated pace. The strength of the U.S. dollar against other beef exporting nations will have the double-negative price effect of making U.S. beef expensive on the global market and lowering the cost U.S. manufacturers pay for imported beef. A notable exception is Prime-graded beef, which will be well-supported for the remainder of July as gradings for this quality grade have been declining.

Ribeyes: Prices will take on a more steady to softer tone for the remainder of July. Retail feature activity, while on the rise nationally, will not be strong enough for packers to raise prices. The exception is for Prime grade, which will be firm due to limited supply availability.

Strips: Prices will maintain a softer tone over the next several weeks as normal seasonality for prices favors lower values heading into the month of August.

Tenderloins: Prices will continue to be rangebound over the next several weeks. Absent any increase in feature activity by retailers, prices for product tend to take on a neutral tone in July for both Choice and Select product.

Tri-Tips: P Price will maintain a softer tone through July as normal seasonal demand for product tends to fall off this time of year. Elevated beef production has increased the supply of product, prompting lower offers by packers to get product to move.

Top Butts: Prices will continue to show a neutral tone as recent price weakness appears to have attracted buying interest. Normal seasonal price patterns would also indicate prices will be rangebound through the remainder of July.

Briskets: Prices will continue to show a soft tone over the next several weeks as supplies of product weigh on prices. The promotional activity we have seen over the last several months from QSR and fast casual chains does not appear to be reinforced with incremental promotional or LTO activity.

Flap Meat: Prices are set to maintain a neutral tone for the remainder of July. While current packer offers are higher than normal for this time of year, elevated production levels will keep prices in check.

Skirt Meat: Prices will be rangebound over the next several weeks. While retail demand will be demand-positive, ample supplies will prevent packers from raising offers for the remainder of July.

Inside Rounds: Prices for the round primal overall will have a stronger tone going into the end of July. Prices for inside rounds will be well-supported by strong retail demand at the meat case

Ground Chuck: Prices have shifted to a more balanced tone. While grinding meat demand will remain strong for the rest of July, increasing supplies should keep prices in check.

81/19 Ground Beef: Prices will continue to show neutral tone as ground beef values tend to be more rangebound in the weeks following the Independence Day holiday. Retail demand will be robust, which will keep prices in check in the face of elevated fed cattle slaughter in over the next several weeks.

Poultry

Markets this past week were flat going into and out of the holiday which traditionally has seen higher prices. Bird weights and pounds slaughtered have remained the same as year ago numbers. There has been a sell off of freezer stock over the past month which has pushed frozen inventory levels to below 2017 numbers. This is a strong contributing factor to the sluggishness of the fresh markets.

WOG’s: Slow holiday retail ad movement contributed to a steady market this last week and that trend looks to continue into the next several weeks.

Breasts / Tenderloins: This past week saw prices move slightly downward on medium and jumbo boneless skinless breast meat as retailers and foodservice operators settle into the summer season. There may be a continued slight downward trend to medium and jumbo boneless skinless through the summer but prices will still remain below year ago levels. Tenders continue steady and valued as the supply of frozen inventory is below last year.

Wings: : Markets have moved slightly down recently on medium and jumbo wings. High demand, low inventory levels and not enough wings have led to prices being 25% – 40% above year levels. Don’t forget that NATIONAL CHICKEN WING DAY is celebrated on July 29!

Thighs: Dark meat is still trending upward against seasonal norms. Frozen inventory levels are at record lows on some cuts which has shown up in higher fresh prices so far this year. Expect the coming months to see prices remain at current levels which are slightly higher than year ago levels.

Turkey Whole Birds: Whole birds are also seeing low frozen inventory levels but those levels have not had much effect on prices which although above year ago levels, are mostly steady.

Turkey Breast: Fresh Turkey breast meat is steady again this week as it has been for months. This is normal for this time of year ahead of the beginning of school year production of turkey items and the normal seasonality of breast meat demand.

Pork

Pork prices will take on a stronger tone over the next several weeks as market participants begin to refocus on the impact of increased exports on U.S. pork prices. May pork export data, which was released last week, showed a 1.1% volume decline from May 2018 and it was noted that last year’s figure was unusually strong. The decline in the pork cutout value recently has caught the attention of Mexico and overseas markets raising expectations for increased imports. The June weekly pork export data, while not as official as the monthly data, points to an accelerated pace of exports.

Bellies: Prices will take on a stronger tone over the next several weeks as the recent decline in values will encourage packers and processor to store product with hopes of selling to the market at higher values. From a seasonality perspective, July is normally a month of rising prices.

Loins: Prices remain in the current ranges through the remainder of July. While buying interest from overseas markets has picked up in recent weeks, price advances will be tempered by slow demand from the domestic market.

Ribs: Prices may have shifted to a slightly stronger tone for the next several weeks. Feature activity by U.S. retailers was increased almost 75% from the prior week and the same week last year. Buying interest from non-NAFTA markets has also accelerated in recent weeks, which will also be supportive of prices.

Butts: Price continue to be slightly softer through the month of July. While supplies have been ample as the result of strong pork production, increased buying interest from overseas markets will keep prices in a neutral tone.

Hams: Prices have had a stronger tone recently and should for the remainder of the month as the trade resolution with Mexico will increase demand for product south of the border. Mexico has traditionally been the largest buyer of U.S. hams.

Seafood

Farmed White Shrimp: Market remains firmed on all sizes & forms of shrimp 26/30 and larger and some strengthing in price on 31/40. Expectations are for little downward pricing through the summer.

Farmed Black Tiger Shrimp: Larger shrimp continue to demand premiums and the market has steadied on smaller than 21/25 sizes.

Wild Gulf of Mexico Shrimp: The Mexican wild shrimp fishery is over until fall. With the exception of U/12 & U/15 much of the White shrimp are short to out of supply until next season. The domestic gulf of Mexican shrimp new season production has been limited to date which has caused an overall shortage in the market. The Domestic gulf fishery in Texas is expected to open on Monday, July 15th.

Warm Water Lobster: The limited availability within the market is unchanged. Demand is active for remaining balances resulting in sharp premiums being paid. Supplies are extremely short and holes continue to develop in inventory and will continue until the new season begins early fall. Short Term: Strong pricing.

Cold Water Lobster: Market prices are firm as the Canadian season comes to an end. Maine catches are reported to be limited. Demand is active. Short Term: Firm pricing.

Lobster Meat: Market prices are firming with new season production and limited supply. Reports suggest an active demand as we enter the warmer months. Short Term: Steady pricing.

Canadian Snow Crab: All crab out of the Gulf and Newfoundland is steady. Supplies are barely adequate for an active demand. Short Term: Stable Price.

King Crab Legs: Overall market remains unchanged with few lower offers noted on 20/24 Russian Kings. Supplies are barely adequate for a moderate demand. Short Term: Stable Pricing.

Blue Swimming Crab: Prices continue to remain unchanged as product in country is adequate to meet demand as we move into the busier summer selling period.

Ahi/Yellow Fin Tuna: Cost of steaks and loins are stable but expected to increase to account for anticipated lesser catches in the future. Market for poke cubes and saku blocks has increased due to increased demand and less raw materials to produce. Short Term: Firming prices.

Pangasius / Swai / Basa: The market overseas and domestically has softened compared to previous months as plants are looking for orders for current production. Inventories are fully adequate for a moderate demand. Short Term: Weak pricing.

Norwegian Salmon: Market is unchanged and remains steady. Short Term: Steady pricing.

Chilean Salmon: Market remains unchanged. Supplies are adequate for a fair demand. Short Term: Steady prices.

Mahi Mahi: South American fishing has slowed down and supply of imported mahi continues to be tight. Prices have slightly increased. Short Term: Firm prices.

Catfish Fillets: Import prices are slightly up but much of the 10% tariff was absorbed into the market. No change has been reported. Demand remains stable to flat. Inventory is available. Short Term: Stable Pricing.

Scallops: Market is stable on large natural scallops. Good volume landings have been reported. Short term: Stable pricing.

Atlantic Cod: Overall the cod stock is good and production is steady for the US markets 8/16 cod from Iceland is still on the tighter side, 16/32s are in good supply. Pricing is stable.

Pacific Cod: Prices are coming down slightly as demand has weakened.

Pollock: Single frozen pollock fishing has been good in the A season. Prices are now steady. Twice frozen China – pricing pressure is upward due to the single frozen market being up, as well as upward pricing pressure from other species.

Dairy

Milk / Cream: Milk production is seasonally declining as warmer temperatures are reducing cow comfort throughout the bulk of the U.S. Prices are well supported seasonally. Along with the strong pull from ice cream and other Class II manufacturers, this is the time of year when butterfat levels in milk reach their lowest levels. This is adding further tightness to the cream market and should keep multiples firm.

Butter: Prices remain near calendar year highs as the slower churn rates, due to the limited/more expensive cream supplies. Stocks are still clearing into cold storage, but at a rate that will keep inventories well below last year. Other than slowing production, Q3 demand has remained seasonally strong when compared to the first half of the year. This has kept supply at tighter levels than buyers are used to seeing in the nearby market, supporting continued firm prices.

Cheese: Cheese production is active across the majority of the U.S. and nearby milk supplies remain available. Even with the smaller discounts this year, cheese prices at calendar year highs continue to incentivize production. Even at the elevated levels, demand has remained firm and is supporting our ideas that prices will remain elevated through the seasonally firm summer months.

Shell Eggs: Prices have continued to set back from their June highs as the higher prices shut off some of the promotional activity that helped support prices in May/June. There still appears to be too many birds in the pipeline as supplies are still readily available across the different sizes and colors. Prices should continue to feel some pressure, but ultimately appear rangebound between the recent high and low.

Grain & crop

The corn and soybean markets are in consolidation mode ahead of the USDA crop report update this week, while the wheat markets have been trending lower as harvest progresses in the S. Plains (HRW) and nice rains have materialized in the N. Plains (HRS). With all the uncertainty around acreage this year, and yield potential due to the late planting, the longer term direction appears to be higher for corn and supportive for beans.

Soybean Oil: Soybean oil has found itself in a well defined range as soybean stocks remain plentiful, but slower farmer selling and crush plant maintenance downtimes have slowed crush rates and reduced the amount of oil being produced. This has further tightened stocks given the firm demand still coming from the biodiesel industry. These competing factors look to keep oil trading sideways in the near term.

Canola: The canola seed market was down hard last week, with new crop futures making new contract lows on Friday. The Canadian prairies have seen some much needed rainfall over the last ten days and there has been no progress in the ongoing dispute between Canada and China. Canola oil should remain weak as Canadian canola stocks are large.

Palm Oil: Global palm oil stocks have been on the decline of late but currently remain more than adequate to fill end user needs. Palm oil futures continue to struggle, still trading near seven month lows in the front end.

Produce

Salinas Valley Row Crops

  • Iceberg, romaine, green leaf, broccoli, cauliflower, and celery stocks are limited in California’s Salinas Valley
  • Processors are harvesting more acres than normal due to light lettuce weights
  • Regional growing seasons (Colorado, Eastern Canada, and the Northeastern U.S.) are off to a very slow start as a result of adverse weather conditions
  • Lower yields are forecast in all growing areas over the next two weeks; demand will continue to outpace supply

Strawberries

  • Markon First Crop (MFC) Strawberries in the ReadyCycle™ carton are available
  • Recent adverse weather conditions continue to stunt plant growth causing uneven fruit size and maturity
  • Bruising and misshapen fruit may be present in finished packs
  • Prices are expected to remain at elevated levels through the month

From the Fields: Ready-Set-Serve (RSS) Chopped Romaine Quality

Romaine and other lettuce supplies are very tight in California’s Salinas Valley. Value-added processors are harvesting fields that are at less than ideal maturity in order to meet demand. The current summer romaine varieties are darker in color and have leaf texture that is more susceptible to bruising during processing when harvested at a younger stage. Finished packs are exhibiting elevated bruising and in some cases, reduced shelf life potential.

This issue is expected to continue off and on through early next week or possibly longer. Markon’s supplier will work to remove as much dark leaf material as possible to minimize bruising.

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