Business Insights

June 2019 Market Outlook

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Beef

Prices will maintain a neutral tone going into the end of June as increased domestic grilling season demand for product will be met with strong production from packers and weak exports. This week the beef feature rate climbed by 6.5%, taking the summer grilling season into full swing. Many retailers will be featuring Ribeye Steaks and Ground Beef as consumers finally prepare for BBQ celebrations for Father’s Day and beyond. Increased supplies of product will keep prices rangebound; earlier this week the USDA forecast Q3 2019 beef production at 7.04 billion lbs., an increase of 3.2% over last year. Furthermore, a persistently stronger U.S. dollar, will be a headwind on export demand as U.S. is less competitive as compared to other beef exporting nations.

Ribeyes: Prices will strengthen for Prime and Choice grade as retailers have ramped up their feature activity going into grilling season and Prime will be particularly firm due to a seasonal decline in Prime grading over the last few weeks.

Strips: Prices will be rangebound over the next week for both Choice & Select quality grades. While retail feature activity at major supermarkets has increased over the last week, ad space is still well below year ago levels.

Tenderloins: Prices will be sideways/flat over the next few weeks as a pick up in feature activity and increased demand for grilling meats should offset increased supplies of product.

Tri-Tips: Prices will be soft as seasonal demand for product tends to weaken markedly going into the end of June.

Top Butts: Prices continue to maintain a soft tone as excess supplies have packers discounting prices to make product move. Even with Choice values trading well below the five-year average price, buying interest is limited. At these price levels top butts are a good item for foodservice operators to feature.

Briskets: Brisket prices which have been unusually strong appear to have peaked and started a significant move lower. Look for continued weakness..

Flap Meat: Prices will maintain their soft tone as seasonal prices tend to decline in June. Prices will also be under pressure due to weakness in restaurant sales for segments which typically feature flap meat in their product offerings.

Skirt Meat: Prices will continue with a neutral tone going into the Father’s Day weekend. While normal seasonal demand for skirt meat strengthens in June and July, modest feature activity by retailers will keep prices rangebound.

Inside Rounds: Prices have taken on a neutral tone as seasonal demand for product does not typically pick up until after the Fourth of July holiday weekend. Elevated slaughter rates will keep packers well-supplied for the next several weeks.

Ground Chuck: Prices for the Chuck composite with be mostly rangebound, however demand for grinding meats will be well-supported due to consumer demand for ground products.

81/19 Ground Beef: Prices will maintain a firm tone due to very strong retail feature activity and strong grilling demand going into the upcoming Father’s Day holiday. Supplies have been reported to be coming down for fat trimmings, which is supportive for prices.

Poultry

Markets this past week retreated a bit. Bird weights, birds processed and birds hatched all were at or slightly above year ago levels. Still a cautionary note to the poultry complex in general will come from grain prices as USDA begins to see the damage the recent weather issues may have had as well as grain stock levels.

WOG’s: Bag fryers had an uptick in retail feature this past week as well as retail rotisserie birds which is normal for this time of year however prices which normally start upward, have retreated a bit but are not expected to stay that course through the summer.

Breasts / Tenderloins: Prices this past week remained steady however medium sized breasts retreated just slightly. The disappointing performance of the beginning of grilling season has caused prices to remain either stable or dropping slightly as demand is slower than anticipated. Tenderloin demand has remained steady this summer so far and is keeping pricing steady.

Wings: Wings have been the high demand item from foodservice operators and processors. Intense interest in NHL and NBA playoff runs have kept wing demand high especially in those markets with playoff teams.

Thighs: Dark meat continues to rise in prices as domestic and export demand has intensified keeping markets rising well above year-ago levels and looks to continue.

Turkey Whole Birds: Frozen whole birds are starting their annual climb as the industry assess placements of holiday birds. Look for prices on hens to start climbing as many growers are preferring to grow a larger hen or toms.

Turkey Breast: Fresh Turkey breast meat is steady. There is projected to be a slight seasonal uptick in the midsummer lasting into the fall but for now, it is steady as she goes.

Pork

Prices will maintain a neutral tone over the next few weeks as increased export demand will be offset by a significant increase in U.S. production, keeping prices around current levels. Weekly exports of Fresh, Chilled and Frozen pork muscle cuts continue to impress with a cumulative commitment level 26.9% above last year’s pace. Approximately 30% of this total is destined for delivery to China. Traders are expecting continued interest in export to China as the country seeks to backfill pork production losses due to African Swine Fever. Earlier this week the USDA forecast U.S. pork production for 3Q 2019 at 6.675 billion lbs., an increase of 5.7% over 3Q 2018.

Bellies: Prices will take on a stronger tone due to a seasonally strong tendency for prices to increase going into the end of June and todays attractive level. Concerns about dwindling supplies will see processors and end users building inventories at current prices, which represent value compared to June of prior years.

Loins: Prices will remain reasonably steady over the next few weeks as an increase in supplies due to elevated hog slaughter levels will be balanced against increased demand from non-NAFTA export markets.

Ribs: Prices will take on a more neutral tone. While burdensome supplies have been keeping prices in check in recent weeks, stronger featuring activity over the next few weeks by retailers will keep prices steady.

Butts: Prices will take on a stronger tone over the next few weeks. While increased production has lead to greater availability of supplies, a combination of increased exports to overseas markets and strong feature activity by U.S. retailers will keep prices well supported.

Hams: Prices are going to take on a more neutral tone going into the end of June. While demand for product has been strong in recent weeks, higher prices in the U.S. are likely to cause export interest to back off as global buyers seek better prices for other exporting countries.

Seafood

Farmed White Shrimp: Market has firmed on all sizes and forms of shrimp 26/30 and larger. Supply of sizes smaller than 26/30 is currently in line and prices are steady. Expectations are for pricing to continue an upward trend over the summer until the increased supply arrives in the fall.

Farmed Black Tiger Shrimp: Larger shrimp are limited to short, while sizes smaller than 16/20 are are currently steady in price.

Wild Gulf of Mexico Shrimp: The Mexican wild shrimp fishery is over until fall. U/10 shrimp is extremely short in supply. The Domestic Gulf of Mexican shrimp new season production has been limited and much of the Mexican product remains a value against Domestic White shrimp.

Warm Water Lobster: The market is thinly-supplied and active demand for remaining balances are 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 steady as new season production enters the market and begins to fill the pipeline. Reports suggest a fairly active demand to replenish depleted supplies. Short Term: Steady pricing.

Lobster Meat: Market prices are being established as new season production makes way into the marketplace. Reports suggest an active demand as we enter the warmer months. Short Term: Steady pricing.

Canadian Snow Crab: Both 5/8 and 8/up market prices have adjusted slightly higher. Supplies are barely adequate for an active demand. Short Term: Firming Price.

King Crab Legs: Overall market is steady to full steady. Supplies are barely adequate for a moderate demand. Market for 6/9 ct is firm. Short Term: Stable Pricing

Blue Swimming Crab: Prices are expected to remain steady through June. Replacement offerings overseas are increasing slightly, but product in-country is adequate to meet demand as we move into the busier summer selling period.

Ahi/Yellow Fin Tuna: Markets are stable. Supplies are adequate for an overall quiet demand. Short Term: Stable prices.

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

Norwegian Salmon: Market trended higher on offerings overseas due to increased demand in Europe. Domestic prices are stable. Supplies are light for moderate demand. Short Term: Steady to firming price..

Chilean Salmon: Market remains steady to slightly soft. Supplies are fully adequate for a dull demand. Short Term: Steady prices.

Mahi Mahi: The market remains stable as overall supplies in the market are available. Short Term: Stable prices.

Catfish Fillets: Import prices are up slightly, 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: Chinese scallop prices have started to increase to account for the increased 25% tariff. Smaller sizes are expected to be scarce within the U.S. Firming pricing.

Atlantic Cod: Overall the cod stock is good and production has picked up for the U.S. markets. 8/16 cod from Iceland is still on the tighter side, 16/32s are in good supply. Atlantic – cod twice-frozen from China – fishing has been good with prices holding firm, pricing should be steady over the next few months. Tariffs could affect these, but product of Vietnam will not be affected.

Pacific Cod: Fishing has been steady. Prices are coming down slightly. Quotas in Alaska are down but up in Russian caught fish. The Tariffs could very well impact the product out of China but the product of Vietnam will not be affected. We should know on tariffs within a few weeks.

Pollock: Single-frozen pollock fishing has been good in the A season. Prices are up from historical lows and will continue to climb. Twice-frozen China – pricing pressure is upward due to the single-frozen market being up, as well as upward pricing pressure from other species. The tariffs could affect the product from China. We should know more in a few weeks.

Dairy

Milk / Cream: This week the USDA again lowered expectations for milk production in the U.S. for both 2019 and 2020. Each year is still expected to increase from the prior year, but at a smaller rate. The continued contraction in the dairy herd remains the major driver of the slowing expansion of milk supply and should keep prices supported near the recent highs.

Butter: The tightening availability of nearby milk supplies has caused the cream market to tighten as a result. Increased demand from the seasonal ice cream manufacturers has caused butter churn rates to slow. Inventories are currently 5% below the prior year and should keep butter prices well supported the next few weeks.

Cheese: Cheese prices remain firm amid solid demand and a slower run rate from processors. Milk prices are not as cheap as they have become used to, and those facilities with large inventories are trying to get those back to more appropriate levels. Block prices are near calendar year highs and should stay well supported over the next few weeks.

Shell Eggs: The egg market has reversed course and is now well off of their recent lows as prices became cheap enough to incentivize more promotional activity from retailers. This has helped absorb the oversupply of shell eggs and is starting to rally prices. Expect this trend to continue as the flock size has been reduced this past month and feed costs are increasing.

Grain & crop

The abundant moisture this spring caused the USDA to lower their acreage and yield expectations for corn this crop year, adding underlying support to the grains and oilseeds as stocks tightened. There are still plenty of soybeans in the U.S., but a wetter 8-14 day outlook is supporting prices as well since only 60% of this year crop is currently planted (88% on average). Price should trend higher until the trade becomes more confident in how many acres were planted and what July weather looks like.

Soybean Oil: Soybean oil has been supported by the slow planting pace in the U.S., but prices have not responded as sharply. Record crush pace keeps large amounts of oil coming to market. Stocks are expected to tighten this crop year based on increased biofuel demand, but large soybean supplies should keep prices trading sideways.

Canola: Some continued dryness in Canada has supported prices despite the ongoing trade war with their major export partner China. The Canadian government is going to boost aid contributions to exporters trying to find new destinations for canola. Supplies are still expected to be large, but it should help keep prices trending higher.

Palm Oil: Palm oil prices continue to track the soybean oil markets as they compete for export business. Palm stocks are seasonally declining, but remain at comfortable levels given the reduced exports to the EU and the U.S. Prices should find support near recent lows and struggle on upside rallies unless it’s sponsored by soybean oil prices.

Produce

Rain Event Affecting New Mexican Onion 
New Mexico’s Hatch Valley growing region received an excess of three inches of rain this week. Expect tight supplies and high prices into the weekend.

  • High temperatures and dry conditions will aid harvest by early next week
  • Onions will require extra time to wash and dry at the shed, resulting in loading delays
  • Lead-time and flexibility will be needed for order coverage

Rising Bell Pepper Prices

Bell pepper prices will rise next week; supplies are tightening as the crop transitions north. Expect elevated markets for the rest of June.

  •  Green bell harvesting is winding down in the California desert region and slowly starting in California’s San Joaquin Valley
  • The Georgia season is ending sooner than normal due to high temperatures; growers are moving to North Carolina
  • Red and yellow bell pepper supplies will tighten as the California desert and Georgia seasons wind down over the next two to three weeks
  • Demand will shift West due to limited East Coast stocks, but California volume will not meet the extra demand
  • Expect active markets and limited supplies through June as bell pepper growing regions transition on both coasts

Limes
Rain is forecast in the primary growing region of Veracruz, Mexico starting today, Thursday, June 13 and continuing through next week. Prices will rise, especially for small-size fruit

  • Rain will be focused in Martinez de la Torre, Veracruz
  • Unfavorable weather will delay harvesting and slow production, reducing shipments into the U.S. next week
  • Rain-related quality issues such as oil spotting and stylar are concerns
  • Markon recommends ordering for quick turns

Strawberry Quality: Markon First Crop (MFC) Strawberries are available in Watsonville and Santa Maria, California.

Heat-related quality defects are being observed by strawberry growers throughout the California growing regions of Salinas/Watsonville and Santa Maria. Above-normal temperatures in the upper 80s to mid-90s earlier this week have impacted many crops. Varying levels of the heat-related defects listed below are expected to last through next week at least:

  • Bleeding
  • Bruising
  • Bronzing
  • Decay
  • Over-ripe fruit
  • Shortened shelf-life
  • Small size
  • Soft texture

We are securing the best quality lots that have been more protected from heat/sun exposure for MFC Strawberries. Cold-chain management is a vital component of maximizing quality and shelf-life.

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