Business Insights

September Market Outlook

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Beef

General comments

As of Thursday last week, cash cattle in the north traded at $107-108.50 live and $170 dressed. Trade in the south is at a standstill. Cattle owners are asking prices from $110-112. Sales volumes for last week were also flat with the past couple weeks. The cutouts were mixed at mid-week trading last week. The Choice cutout remains above last year with more volumes of beef — a healthy sign for beef demand. The Choice/Select spread is $8.

Erratic weather patterns across the country contribute to erratic eating patterns. Extreme heat in the west has supported wildfires and drought. In the east, heavy rains have dominated the news. Retailers will have Labor Day weekend beef specials and the arrival of cooler, more stable weather in September may increase interest in beef. The export markets continue to buzz with demand for U.S. beef. The most recent reports show beef exports well over 20% of our weekly production.

Loins

Top Butts: Choice Top Butts moved lower at the beginning of the week, but strengthened and surpassed last week’s levels by the end of the week. Meanwhile, Selects gradually migrated higher throughout the week. This week’s price action moves against seasonal tendencies, but current price levels mirror year ago pricing. Short Term: Steady to lower pricing.

Strips: Choice values climbed back up to their seasonally average price levels, while Selects were steady with a weaker undertone. Seasonal tendencies indicate that prices should progressively decline through the fall. Short Term: Steady to lower pricing.

Tenderloins: Seasonal tendencies prevailed, and tenderloin prices appreciated this week. In spite of the increase, current prices remain well below seasonal averages. Short Term: Steady to firm pricing.

Tri-Tips: Choice Tri-Tips were steady with a stronger undertone and Selects were steady with a weaker undertone. Prices are expected to deflate moving into and through the fall. Short Term: Steady to lower pricing.

Ribs

Ribeyes: Choice values were steady with a weaker undertone and Select values pushed past seasonal averages. Though elevated pricing is expected this time of year, current prices for both Choice and Select ribeyes have rocketed past seasonal averages. Short Term: Firm pricing.

Chucks

Chuck Rolls: The market for chuck rolls diverged this week. Choice prices declined and Selects increased. Both cuts are well above seasonally average pricing, and are expected to increase through the month of September. Short Term: Firm pricing.

Teres Majors: Both Choice and Select prices were mostly steady this week. Prices typically decline at the end of August, but the market’s ability to maintain its strength is pushing prices back towards their seasonal averages. Short Term: Steady to lower pricing.

Briskets: Choice and Select briskets were steady this week. Prices have defied seasonal tendencies, and float well above seasonally average pricing. However, the market should stabilize in the near future. Short Term: Steady firm pricing.

Thin Meats

Ball Tips: The market was mostly steady this week, with some strength observed in Choice prices. As with the brisket market, ball tip prices continue to increase and move against seasonal price trends. Choice prices are well above seasonally average pricing, while Select values mirror seasonal averages. Short Term: Firm pricing.

Flap Meat: Flap meat prices continued their ascendance this week. Both Choice and Select prices dwarf their respective seasonal averages, and have actively moved against seasonal price trends. Short Term: Firm pricing.

Skirt Meat: Both inside and outside cuts maintained their value this week. Price movement has traveled in accordance with seasonal price trends, but remains above the 5-year average. Short Term: Steady to lower pricing.

Flank: The market for flank meat was stable this week, and continues to maintain its strength relative to seasonal averages. Short Term: Steady firm pricing.

Rounds

Peeled Knuckles: Choice prices dropped significantly and Selects held steady. The price decline in Choice meat is in line with seasonal price trends, and current prices for both Choice and Selects are well below seasonally average levels. Short Term: Steady to lower pricing.

Inside Rounds: Choice values were steady with a weaker undertone while Selects were steady with a stronger undertone. Prices remain below their seasonal averages, but are slowly climbing back up toward those averages. Short Term: Steady pricing.

Bottom Round Flats: The market for bottom round flats gradually increased this week. The market remains below seasonal averages, and will likely remain that way through the end of the year. Short Term: Steady to firm pricing.

Eye of Rounds: Selects increased this week and Choice prices were mostly steady. Prices usually increase during this type of year, but current prices are well below seasonal trends. Short Term: Steady to increasing.

Grinds

Fresh 90s were steady this week while pricing on fresh 50s moved back down toward their seasonal average. Fresh 90s are currently below average and fresh 50s currently mirror their seasonal average. The grinds market is expected to soften gradually moving into the fall. Short Term: Steady to lower pricing.

Poultry

General Comments

Broiler-Type Eggs Set in the United States Up Slightly – Hatcheries in the United States weekly program set 226 million eggs in incubators during the week ending August 25, 2018, up slightly from a year ago.

Broiler-Type Chicks Placed in the United States Up 1 Percent – Broiler growers in the United States weekly program placed 187 million chicks for meat production during the week ending August 25, 2018, up 1 percent from a year ago. Cumulative placements from the week ending January 6, 2018 through August 25, 2018 for the United States were 6.26 billion up 1 percent from the same period a year earlier.

Other than jumbo wings getting support from the start of football season, most chicken items are well-supplied and trending lower. There is plenty of jumbo boneless, skinless breast meat in the market – see below for additional comments.

Wogs

Whole Bird and WOG markets were mostly steady with a weaker undertone this week as the elevated production levels continue affecting sellers. Short Term: Steady to lower pricing.

Breast Meat & Tenderloins

Jumbo and Select breast meat and tenderloin values trended lower this week. Jumbo breast quotations are at the lowest they have been in 10 years. Price levels did not stabilize last week and moved lower yet again – presenting a bargain for buyers. Short Term: Steady to lower pricing.

Wings

Wings were able to maintain the majority of their gains last week, and ranged from steady to weaker this week. Wings will likely maintain their strength heading into football season. Short Term: Steady to firm pricing.

Thighs

Thigh and dark meat prices climbed at the beginning of the week, but closed only slightly above last week’s levels. Prices are still expected to soften in the near future. Short Term: Steady to lower pricing.

Turkey whole birds

The whole bird market found support this week, and price appreciated slightly. Supply levels are adequate for the moderate demand levels, and prices remain below last year’s levels. Short Term: Steady pricing.

Turkey breast meat

Fresh breast meat prices softened this week, as a result of sales activity slowing down in response to last week’s gains. Supply levels are adequate, and price are above year-ago levels. Short Term: Steady pricing.

Pork

General comments

The USDA released their semi-annual United States and Canadian Hogs report last week. United States and Canadian inventory of all hogs and pigs for June 2018 was 87.6 million head. This was up 3 percent from June 2017, and up 5 percent from June 2016. Market hog inventory, at 80.1 million head, was up 3 percent from last year and up 5 percent from 2016. The report was deemed neutral as the numbers came in close to expectations.

The United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to the new terms on auto trade and other issues to remain part of the three-nation pact. Although the details so far have focused on the auto industry, things are looking more optimistic for the pork market, especially hams.

There has been one new case reported of African Swine Fever (ASF) in China. So far, China has culled more than 24,000 pigs in four provinces to stop the disease from proliferating; a minuscule amount compared to the 433 million they have throughout the country. Because China raises almost half of the world’s pigs, and they are the biggest consumer of pork, this story remains on the radar.

Loins

Loin prices were weaker this week, but remain well below seasonally average price levels. Prices usually firm up moving into Labor Day and through the month of September. Short Term: Steady to firm pricing.

Tenders

Prices were steady with a stronger undertone this week. Current price levels remain at their lowest point in five years for this week in August. Short Term: Steady to lower pricing.

Butts

The market for Pork Butts increased again this week as we approach Labor Day. Prices should maintain their strength through most of September. Short Term: Steady to firm pricing.

Belly

Belly prices continued to slide this week in accordance with seasonal tendencies. However, current prices are significantly lower than seasonal averages. Short Term: Steady to softer pricing.

Ribs

Backrib prices climbed after taking a sharp downward turn at the end of last week. Seasonal tendencies indicate that backrib prices will hold mostly steady heading into the start of football season. On the other hand, primal and spareribs were mostly steady this week. All of the current rib prices remain below their respective seasonal averages, and should maintain their current levels. Short Term: Steady pricing.

Hams

Ham prices were not able to find price support and stayed averaged mostly steady this week. The current price levels represent 5-year lows for the fourth week in August, and should remain close to their current listings. Short Term: Steady pricing.

Dairy

Butter

Butter production is ramping back up around the nation as cream supplies become more readily available. In the West, butter prices have trended lower in recent days due to buyers’ satisfactory coverage in the current term. Northeastern butter production has returned to seasonal levels, but lower milk yields and elevated cream prices in the region are prompting producers to sell off supply in the spot market rather than churn. Conversely, producers in the Midwestern region are increasing churning activity because cream prices are more approachable now than they were in previous weeks. Short Term: Steady to lower pricing.

Cheese

Cheese production is steady to increasing across the country, and milk supplies available to producers remain sufficient despite the seasonal downtrend with schools reopening. Nationwide, demand ranges from steady to increasing. In the Western region, production is steady and in line with seasonal norms. Sales activity in the region is mixed, with some buyers reporting steady orders and others reporting a seasonally high number of orders. Midwestern demand reports have been relatively similar throughout the month of August, but demand for mozzarella, provolone, and cheese curds has been steadily increasing. Lastly, Northeastern cheese producers are receiving steady milk loads and operating at full capacity, and demand is increasing. Short Term: Steady to increasing.

Shell eggs

Shell egg prices increased this week, but demand tampered off as a result. Prices are expected to come back down to seasonally normal prices in the near term. Short Term: Steady to lower pricing.

Milk & cream

Milk production still varies by region, and it’s primarily driven by seasonal climate conditions. For example, Northeastern milk production is down due to heavy rains, while milk production is up in the Western region. In the Midwest, supply reports for fluid milk range from tight to balanced in the northern part of the region.

Cream supplies are becoming more available nationwide. In the Northeast, cream prices remain elevated relative to other parts of the country as a result of the poor weather conditions, but availability on cream is increasing by the day. Meanwhile, cream prices in the Midwest became more approachable for butter producers – prompting them to ramp up churning activity. Lastly, in the Western region cream prices have dropped due to slower sales activity.

Seafood

Shellfish & shrimp

Shrimp: Premiums are developing on 21-25 count HLSO shrimp, but aside from that the majority of the import market is unchanged this week.

Farmed White: Diminishing availability on HLSO shrimp in the U.S. is contributing to the developing premiums on 21-25 count HLSO shrimp coming from Latin America. However, elevated asking prices have been met with significant resistance from buyers, which is holding the market steady.

Farmed Black Tiger: The market was unchanged this week, but larger black tiger shrimp are still in limited supply leaving the price fully supported.

Wild, Gulf of Mexico: There was weakness in the brown HLSO shrimp and PUD shrimp markets this week. Specifically, 21-25 through 51-60 count brown HLSO shrimp traded lower, and 16-20 through 41-50 count PUD shrimp traded lower. Meanwhile, white shrimp continues to receive support due to ongoing supply concerns.

North American Lobster: The market for tails was fully supported this week, and premiums developed on 6-7 oz. tails. Demand is high, explaining the price support, and the lobster meat market remains competitive.

Warm Water Lobster Tails: The market is steady to firm this week as new season arrivals continue to travel through the supply chain relatively easily.

Live Lobster: The live lobster market was unchanged this week despite ongoing inventory concerns for Hard-shell lobsters.

Scallops: Premiums persisted in the scallop complex as landings for larger sized scallops continue to shrink. Short Term: Firm pricing.

King Crab: The supply shortage on smaller sized king crabs is holding up prices, and relief is not expected to come for a few more weeks. Short Term: Steady firm pricing.

Snow Crab: Snow crab prices were idempotent. The market is ranging from steady to full steady with 5-8 oz. crabs on the weaker end of the spectrum and 8-10+ oz. crab on the stronger side. Supplies for the larger sized snow crabs are less than adequate for an active demand. Short Term: Steady pricing.

Crab Meat: Blue swimming crab meat is barely steady to slightly weaker on colossal, jumbo lump and super lump crab. Market participants continue to manage inventories, and sales activity has been quiet. Conversely, the red swimming crab meat is firming up on jumbo and lump crab meat because supplies remain light.

Finfish

Salmon: 10+ lb. fish in the West Coast Whole Fish market are firming as demand is outpacing supply, while pricing on the smaller sized salmon holds steady. The Northeastern Whole Fish market is also firming on 10+ lb. and 14+ lb. fish because supplies are barely adequate for improving demand conditions. Alternatively, Chilean Whole Fish prices are holding steady with moderate demand; and the Norwegian Whole Fish market is firm.

Atlantic Cod: Prices are unchanged, and the strength of current prices are expected to hold through the end of the year. Short Term: Firm pricing.

Pacific Cod: As with Atlantic Cod, the elevated prices are expected to persist through the end of the year as a result of a poor European fishing season and increased costs on raw materials. Short Term: Firm pricing.

Pollock: The market for Basa was steady this week in accordance with last week’s report about record-high placement costs for Basa. Short Term: Steady pricing.

Basa: Reports this week emphasized the record high placement prices for Basa. However, it was noted that volume has dropped significantly as Vietnamese exporters battle with U.S. trade barriers and seek relief in other markets. Short Term: Steady pricing.

Catfish: Prices were unchanged from last week, and remain below year-ago prices. Short Term: Steady pricing.

Whole Fish Tilapia: Supply and demand conditions persisted, and the inflated Basa prices have resulted in elevated demand for Tilapia. Consequently, prices are firm and are expected to remain that way until demand conditions settle down. Short Term: Firm pricing.

Mahi Mahi Fillets: The Mahi market remains under pressure due to lackluster demand conditions. Slower demand is hampering sellers’ ability to move product. Short Term: Lower pricing.

Grains & oils

Grain & crop summary

This week’s low-level trade talks between the U.S. and China were said to result in very little, to no, positive developments being made. The latest round of new tariffs on $16 billion worth of products went into effect yesterday, with another $200 billion proposed. The key point to the comments from the delegation appears to be that there is the possibility for purchases of U.S. soybeans to begin again, but only at a time when South American soybeans are no longer available and/or priced comparably to U.S. values with the 25% import tariff in effect.

The U.S. and Mexico reached a bilateral deal on their segment of the NAFTA agreement, with both sides stating the deal will remain in place even if the U.S. and Canada cannot come to terms by Friday, which is the deadline set by Mexico to allow enough time to have a “new NAFTA” ratified before the new president takes office December 1st. Canadian and U.S. official are said to begin meeting today, once again, in an attempt to make it a trilateral agreement, which is Mexico’s strong desire, although President Trump has been outspoken that an agreement with Canada is not necessary for the deal with Mexico to move forward. Mexico is reported as having promised to buy US soybeans.

The USDA announced details of the farm aid benefit package to help offset price declines to farmers as a result of the retaliatory tariffs against China, which have hurt U.S. agriculture exports. This is somewhat bearish, as it keeps farmers from slashing production due to losses on trade.

Soybean oil

Argentina’s agriculture ministry said they are currently loading a 29,000 ton shipment of soybean oil destined for China, with another 61,000 tons set to be shipped, as well, reflecting their first soybean oil exports to China in three years. While at first blush this would be viewed a negative for the US soybean market upon closer inspection it’s more than likely that the soybean oil to China is made from US soybeans. US soybean oil exports for the week ending August 30 were 24,000 metric tons. This was 15,000 tons above the weekly amount need to meet the USDA’s export forecast for the current market year. This is friendly for soybean oil prices.

Canola

Statistics Canada will release their crop production report tomorrow morning. The canola crop is seen at 20.2 million metric tons (MMT) (19.3 to 21.0 MMT range of estimates) vs. 21.3 MMT last year, while soybeans are estimated at 7.0 MMT (6.7 to 7.3 MMT range of estimates) vs. 7.7 MMT last year. This is neutral/friendly for canola oil prices.

Palm oil

Oil World analyst Thomas Mielke said he expects Malaysia’s 2018 palm oil production to hit 19.8 million metric tons (MMT), nearly unchanged from last year’s 19.92 MMT, but a bit below previous ideas of 20.2 MMT amid a slight dip in yields from peak levels earlier in the year. He sees 2019 production, though, bumping back higher to 20.4 MMT. Globally, Mielke expects world palm oil production in 2018 to hit 70.2 MMT, up from 67.9 MMT last year, with further increases to 72.7 MMT in 2019. He sees the potential for a rebound in Malaysian palm oil futures to round 2,500 ringgit/ton ($609.00/ton) in the months ahead from current levels of 2,232 ringgit ($543.00), with a floor seen at 2,100 ringgit ($511.00). His comments helped support palm oil futures.

A survey of Indonesian palm oil industry associations/industry groups showed ideas the country’s palm oil production in July was 3.897 MMT, up from 3.452 MMT in June and solidly above last year’s 3.587 MMT, while end July palm oil stocks were seen at 4.300 MMT, nearly unchanged from June’s 4.335 MMT and still running a massive 78% above last July’s 2.422 MMT. Exports rose in July to 2.887 MMT from 2.477 MMT in June (2.400 MMT last year), which prevented stocks from rising despite the increase in production. Indonesia does not report official monthly palm oil data. This is neutral/friendly for palm oil prices.

Produce

Cilantro

  • Ready-Set-Serve Washed & Trimmed Cilantro is sporadic due to erratic quality; packer label will be substituted as needed
  • Supplies are increasing however, quality remains fair as shelf-life concerns persist
  • Prices are decreasing

Lemons

  • Markon First Crop (MFC) and Markon Essentials (ESS) Lemons are limited; packer label is being substituted as needed
  • Supplies are tight; stocks are expected to remain extremely limited through September, when the Arizona/California desert season begins
  • Substituting sizes, grades, and country of origin will aid in order coverage; lead-time is highly encouraged
  • Lemon prices remain elevated

Oranges

  • MFC and ESS Valencia Oranges are sporadic; packer label supplies are being substituted as needed
  • Domestic California Valencia orange supplies are tight, especially 88-count and smaller sizes
  • Offshore Navels will be supplemented as needed to fill all orders
  • Prices will continue to rise

Squash

  • MFC Squash is not available; packer label is being substituted as needed
  • Cool weather and rain has slowed production and reduced yields in California and Michigan
  • Expect limited supplies out of all growing areas for the next two to three weeks until new crop supplies ramp up
  • Prices are rising in all regions

Highlights

  • Markon First Crop® (MFC) Premium Iceberg Lettuce weights are higher on average than the rest of the industry (47 to 50 pounds compared with 44 to 47 pounds).
  • Shelf-life performance for some romaine based value added salad items has been below-normal for the past week. Markon inspectors have observed elevated mechanical damage, premature breakdown, and decay that could negatively impact shelf-life.
  • California Valencia orange supplies are limited, especially 88-count and smaller sizes; offshore Navels will be supplemented as needed to fill orders.

Produce Highlights

Cucumbers

  • The West Coast market is elevated; Mexican supplies are tight.
  • Michigan stocks are adequate, but supplies are expected to tighten in the coming weeks due to shifting demand.

Green Onions

  • Warm, humid weather in Mexico’s Mexicali Valley is decreasing yields.
  • Supplies are limited.

Potatoes

  • MFC Norkotah Potatoes are readily available in Idaho; size is dominated by 70- through 100-count sizes.
  • Large sizes, 40- through 60- count, and No. 2 potatoes remain limited.

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