Market Outlook

August 5, 2022
  • BEEF
  • POULTRY
  • PORK
  • SEAFOOD
  • DAIRY
  • GRAINS & OILS
  • PRODUCE
BEEF

BEEF

Prices will continue to take on a balanced tone through the end of August, defying the seasonal trend for prices to decline going into Labor Day. U.S. packing facilities slaughtered 651,000 head last week, down 2.7% from the prior week in what some believe is a deliberate move to better manage supply. Packer margins have moderated from elevated levels seen earlier in the year, reducing financial incentives to run larger production schedules. With beef production set to decline later in the year, some end users are buying into the market which is supporting prices. Domestic demand remains fairly firm for this time of year, and a report released this week suggesting that inflation is moderating in the U.S. will have the effect of improving consumer confidence directly and beef demand indirectly. Official trade data this week confirmed that in June the U.S. was a net exporter of beef for the first time this year, tightening domestic availability for U.S. consumption.

Ribeyes:

Prices will maintain a balanced tone through the end of the month. Ribeye’s have grilling appeal to U.S. consumers, however supplies will be adequate to meet demand for the upcoming Labor Day holiday.

Strips:

Prices will take on a firm tone over the next several weeks following seasonal trends that see values firm in the back half of August. Foodservice demand will be adequate for August, however retail buyers will be a bit more aggressive in their purchases and keep prices supported.

Tenderloins:

Prices will take on a softer tone going into the end of the month, defying the seasonal trend for values to strengthen through the end of November. Retail buyers have been backing off high value beef items, forcing packers to soften their offers in order to move product.

Tri-Tips:

While seasonal price trends call for lower values, prices are set to maintain a more neutral tone over the next several weeks. Tri Tips have been increasing their presence on Foodservice menus, elevating demand above normal level for late August to early September.

Top Butts:

Prices will continue to take on a softer tone over the next several weeks, reflecting seasonal price trends. While Top Butts represent good value at current levels, consumer interest at both Foodservice and Retail continues to be very modest.

Briskets:

Prices will take on a balanced tone over the next several weeks even though Brisket values tend to soften in the first half of August. Grilling demand will wane in coming months, however demand from Certified Kosher channels will increase buying demand for the upcoming Jewish holidays.

Flap Meat:

Prices will continue to take on a strong tone over the next several weeks, challenging the seasonal trend for values to moderate toward the conclusion of Summer. Flap Meat demand has expanded into more Foodservice sales channels, keeping prices more supported.

Skirt Meat:

Prices will shift to a softer tone, following seasonal trends for this time of year. Retail demand tends to moderate significantly through the middle of next month, which will move prices lower.

Inside Rounds:

Prices will take on a more neutral tone over the next several weeks, even though the seasonal trend is for values to soften over the next month. Foodservice demand from QSR and Fast Casual segments will remain firm, keeping prices supported.

Ground Chuck:

Prices will take on a more neutral tone over the next several weeks, defying the seasonal trend for values to firm in the back half of August. Retail consumers will continue to favor ground product at the meat case, however supplies of Chuck meat to grind will be more than adequate to meet demand.

81/19 Ground Beef:

Prices will continue to take on a balanced tone during the month of August. Elevated slaughter rates for beef cows due to drought conditions will maintain adequate supplies of lean trimmings over the next several weeks.

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POULTRY

POULTRY

Demand has slowed slightly, but is still above historical levels.

WOG’s:

Larger bird sizes are going for lower bids, while smaller sizes have tighter supply with higher prices.

Breasts/Tenderloins:

Bone-in breasts and front halves are generally slow and steady. Jumbo boneless breasts are also steady.

Wings:

All wing sizes are readily available. Pricing continues to decline, but sellers are hopeful that football season will begin turning prices up.

Thighs/Legs/Leg Quarters:

Prices for dark meat are trending lower and are in good supply.

Turkey Whole Birds:

Very little available on the spot market due to AI. Sellers are able to get very high prices when product does become available.

Turkey Breast:

Very similar to the whole bird offering. Demand is up and supply is being limited by AI outbreaks. Not much available on the spot market.

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PORK

PORK

Prices will continue to take on a strong tone through the end of August as exceptional demand from domestic sales channels have offset the impact of slower pork exports and improved production in the U.S. Pork demand normally moderates in July through the end of the summer, however elevated prices for competing proteins and strong demand for specific pork primals have kept the overall cutout value at the highest level for the week since 2014. U.S. hog slaughter last week was 2.340 million head, an increase of 2.1% from the prior week and 0.6% higher than the same week last year. U.S. pork exports for June were 531 million pounds, a decline of 5.5% from last year while pork exports for the first half of 2022 were 3.15 billion pounds, a decline of 17.7%. Slower exports has meant the U.S. domestic market has more than 676 million pounds of pork available versus last year. While some competing proteins are showing signs of moderating, U.S. pork prices will be well-supported in the near term.

 

Bellies:

Prices will continue to take on a strong tone over the next several weeks, following normal price trends for the month. U.S. bacon processors will continue to bid aggressively for a very modest number of loads of uncommitted bellies to meet customer orders, which will keep prices firm.

 

Loins:

Prices will continue to take on a balanced tone through the end of the month, in line with seasonal price trends. Retail demand for Loins will remain impressive, however softer export demand from Asian markets will keep buyers adequately supplied.

Ribs:

Prices will continue to trade in a narrow range through the end of the month, respecting normal trends for the back half of August. Foodservice buyers will continue to be active, but the seasonal increase in pork production will be sufficient to keep prices in check.

Butts:

Prices will continue to take on a strong tone over the next several weeks, defying seasonal trends for values to moderate. Demand from both Retail and Foodservice sales channels will remain strong, even with current composite values trading at a 30% premium to the five-year average for the week.

Hams:

Prices will continue to take on a strong tone through the end of the summer, falling in line with seasonal price trends. Demand from retail buyers is flanked by unrelenting orders from Mexico, the combination of which will continue to keep prices well supported over the next several weeks.

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SEAFOOD

SEAFOOD

Seasonal changes and yields are effecting the seafood outlook.

Farmed White Shrimp:

There continues to be some strength in the market for Latin-origin shrimp due to ongoing firmness at origin. However, sellers remain cautious to raise prices believing continued increases could impact demand. The market for Asian shrimp remains generally well-supplied and competitive.

Farmed Black Tiger Shrimp:

Fully adequate supply levels continue to weigh on this segment of the market. Smaller shrimp are most susceptible due to white shrimp competition.

Wild Gulf of Mexico Shrimp:

The season is over. Harvests were lower than usual and all importers are allocating inventories accordingly.

Warm Water Lobster:

Markets price have moved down to levels not seen in several years. Demand is moderate and inventory is available. New season catches begin this summer and are expected to remain at current levels. Short Term: Soft Pricing

Cold Water Lobster/Lobster Meat:

Market prices continue to soften as demand slows down and inventories remain available. Larger sized tails are available but will remain limited until fall. Short Term: Soft Pricing

Canadian Snow Crab:

The undertone of the market remains highly unsettled and prices continue to soften on Newfoundland and Canadian product. Short Term: Soft Pricing

Ahi/Yellow Fin Tuna:

The market has seen some softening in steak prices as inventories are now outweighing demand. Domestic prices have seen some softening locally but overseas replacement costs remain elevated with lack of raw materials. Saku Blocks and Poke Cubes remain firm with limited availability. Short Term: Stable Pricing

Pangasius/Swai/Basa:

Markets have seen a continued softening as a surplus of inventory has arrived into the country after being limited while Vietnam was shutdown. Inventory is available and markets remain soft. Short Term: Soft Pricing

Norwegian Salmon:

After many months of stable markets, markets have finally increased as demand continues to increase due to lower availability of Chilean product. Short Term: Firm Pricing

Chilean Salmon:

Markets are mixed with higher and lower offers collected. Inventory is fairly stable with a consistent demand. Processors will have more capacity to freeze product as demand for fresh product lessens and more workers are available. Short Term: Stable Pricing

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Mahi Mahi:

Product is adequate to fill current demand but building of inventory has been a challenge. Market is high but steady.

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Catfish Fillets:

Production is slow and overall market is still challenged for product. Pricing steady but firm.

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Scallops:

Demand is fair with higher and lower offers depending on inventory levels. Pricing steady but soft.

Blue Swimming Crab:

Blue swimming crab meat is barely steady to weak across all grades. Overall, there continues to be lower offers collected, some significantly lower. Supplies are fully adequate to ample for a fair to quiet demand. Replacement product overseas is reported to be barely steady to weak as well.

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DAIRY

DAIRY

Dairy continues to see steady prices.

Milk / Cream:

Milk output is mostly steady to lower as hot summer temperatures are impacting cow comfort and pasture conditions. Domestic milk prices are finding support near the recent lows as the high prices and demand fears removed all the 2022 risk premium from the market. The USDA’s milk production report showed June output above last year (+0.1%) for the first time since October as the herd size was revised higher by 14,000 head this past month. Cream supplies are tightening across the country, with stronger demand being reported in Midwest. Multiples remain firm.

Butter:

Butter prices remain historically firm, and have been chopping sideways for two months now. Inventories are still sitting at tight levels heading into the summer/fall, and growing concerns around the ability to build supplies has generated buying interest on setbacks and limited large scale selloffs. Seasonally, butter production bottoms out in the summer months, and the June production report from the USDA confirmed this as June output was down sharply from May, but still 2.3% higher YOY. July & August will likely be near June level, keeping the market on edge as supplies are historically tight. The USDA confirmed this with their June cold storage report showing butter down 20% from the prior year’s lofty levels. Even though stocks did increase more than , they remain tight going into the drawdown season. The market also remains well supported from slower U.S. and global milk production, and the seasonally lower butterfat content. The elevated butter prices are limiting domestic demand throughout most of the country, while processors are doing all that they can to run at elevated rates. Labor remains a major constraint on the churns ability to increase output.

Cheese:

The cheese markets are starting to consolidate near their recent lows, after hitting their lowest point since January last week.  The market has been leaking lower since May as supplies are abundant and strong prices have limited incremental domestic interest.  Also, the poor economic outlook and fed raising interest rates has cast some further uncertainty around demand going forward, contributing to the weakness.  The USDA’s dairy products report showed cheese production exceeding year ago levels in June by 2.7%, with American and Cheddar output up 1% and 1.1% respectively. When combined with the recent cold storage report showing all cheese in cold storage up 4.9% from last year and just off of last month’s record levels, supplies are abundant.  American cheese in cold storage is also impressive, coming in at 4.7% larger than the prior year. Domestic demand has slowed, but held up slightly better than anticipated given cold storage levels did decline this past month.  Cheese exports in June were impressive, up 33% YOY, while American-style cheddar has increased 96% YTD.  Poor production reports out of the EU should keep a bid under U.S. exports, along with the recent drop in prices making the U.S. more competitive.  Producers are still concerned with labor and logistics, but should continue to run at elevated levels.

Shell Eggs:

The conventional and cage free egg markets are plummeting from extremely overbought levels. The most recent USDA laying flock numbers showed current table egg layers on hand as of July 1st actually increased slightly from the prior month but were still under 300 million and 5.5% lower than the prior year. Given the reduced flock numbers, June egg production was down 5.0% from June of 2021 and the smaller amount of eggs coming to market has kept prices well supported. However, the initial signs of rebuilding the laying flocks, and lack of new commercial bird flu outbreaks is now starting to weigh heavily on the historically lofty prices. Overall shell egg inventories took a small step lower this past week, after a large increase last week. The higher cost environment this year and the overall lack of conviction to higher prices down the road have limited flock expansion nearby, but should pick up soon. Margins at the wholesale level are still dramatically profitable, even with the higher YOY feed prices they are realizing.

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GRAINS & OILS

GRAINS & OILS

The grain and oilseed markets are well supported off the July lows as the hot and dry weather in the Midwest has the markets attention ahead of Friday’s USDA crop report. With the corn market finishing up pollination, and the soybean crop heading into pod set season, the hot and dry weather of late will likely lead to some reduction in yields vs. the current USDA estimates. Some tempering of the drier trend into the 7-10 day outlook could limit advance, but this will need to be realized first. U.S. crop conditions came in lower than expected this week, with the corn rating down 3% to 58% good/excellent, while soybeans declined 1% to 59% good/excellent, and spring wheat fell 6% to 64% good/excellent. This is important to note as corn is in the key pollination phase and soybeans are rapidly approaching pod set in early August. Most ratings are still close to their historical averages though. Winter wheat harvest nears completion at 86% harvested, while spring wheat harvest is just getting underway at 9% complete. Grain vessels continue to load out of Ukraine, with another port opening back up this week. This has limited rallies in the corn and wheat markets as more grain becomes available globally. Still plenty of uncertainty around the overall quality of the crops, and how long this will continue, but still a headwind to rallies nearby. Overall macro fears remain a concern to demand, but the market is now focusing on U.S. weather and crop potential.

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Soybean Oil:

Prices have firmed as stronger soybean and soybean meal values have dragged the complex higher given weather concerns going into the crucial pod set period. Also, the rebounding palm market has helped push soybean oil futures back above their July highs. Crude oil broke back towards $90/barrel, which should keep some pressure on vegetable oils via compressed biofuel margins, but overall demand is firm. Basis offers were little changed again last week as the crushers continue to command hefty premiums given the continued strength of renewable diesel production.

Canola:

Canola seed futures are in consolidation mode, but have followed the other vegetable oils towards the upper end of their recent range. Canola oil basis levels were steady but are starting to take on a weaker tone in the forward positions as the Canadian crop conditions are solid and the crop size should be closer to 20.0 million metric tons this year versus 12.6 million in 2021.

Palm Oil:

Palm oil futures continue to stabilize above their July lows, and remain range bound. Heavy Indonesian stocks have been a headwind to large scale rallies, while Malaysia is still struggling with labor as their production was only slightly higher on this months MPOB report. Palm oil is well below soybean oil prices on the world market and should limit near term downside.

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PRODUCE

PRODUCE

DOWNLOAD THE MARKON FRESH CROP REPORT

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Green Leaf, Iceberg, and Romaine:
  • Green leaf, iceberg, and romaine supplies have been impacted by disease pressure and high temperatures, particularly in south Salinas Valley. Although supplies will remain adequate through the month of August, many growers are seeing reduced yields that are causing markets to rise.
    • MFC Premium Green Leaf is available
      • Despite the warm weather, case weights are high with above-average quality
      • Some lots are showing dense heads, fringe burn, and occasional weak tip but these issues are easily avoided by harvesting crews
      • Markets are forecast to climb over the next 10-14 days, but no major gaps or shortages are predicted
    • MFC Premium Iceberg and Romaine are available; a limited amount of Markon Best Available is being substituted due to low case weights and quality concerns
      • Recent high heat and humidity are causing varying levels of internal burn, growth crack, seeder, salt and pepper, mildew, and thrip damage
      • Iceberg prices will rise over the next 10-14 days; yields are falling due to heat, increased disease pressure, and strong demand
      • Romaine markets are climbing due to reduced plantings as well as elevated pest and disease pressure in second plantings
Green Onions:
  • The market is escalating. Persistently elevated temperatures are leading to low yields in the primary growing region of Mexicali, Mexico.
    • Ready-Set-Serve Green Onions are available
    • Elevated daytime temperatures experienced over the past month, combined with higher-than-average nighttime temperatures, have lowered yields and accelerated growth
    • Hot weather without nighttime cooling relief has led to warmer-than-normal ground temperatures, increasing thrip/pest pressure
    • Labor has been difficult to source, with harvesting made more complicated by the recent heat and reduced trucking capacity
      • Logistically, there are delays in border crossing times due to increased inspections at the Southern U.S. border, further hampering inbound supplies
      • Limited harvestable onions are the result of rapid growth combined with lower yields
      • September temperatures are forecast to be closer to seasonal averages
    • Expect elevated markets for the next four weeks at minimum
Onions:

The California and New Mexico summer seasons continue to wind down. Limited supplies of new crop onions are on the market in the Northwest.

New Mexico

  • Size has begun to decline in remaining yellow onion supplies, with fewer colossals and super colossals available; onions pack-outs are heaviest to medium and jumbo sizes
  • Red onion supplies are ample; prices continue to inch down
  • White onion volume is low; expect markets to increase
  • The New Mexico season will run through the end of next week, with limited availability the week of August 22

 

California

  • Several growers have depleted supply; others will have onions through next week
  • Stocks are currently sufficient to meet demand for the rest of the season
  • Yellow onion pricing has eased, as demand has shifted to the Northwest
  • Red onion demand is weak; markets continue to inch down

 

Northwest

  • Washington stocks are on the market; size is small in early yields, favoring medium and jumbo onions
  • In the Idaho/Oregon region, shipping began the week of August 8 with low volume
    • Most suppliers will start the week of August 15
    • Size will also be on the smaller end to start, with limited colossal and super colossals
  • Colorado production is forecast to begin the week of August 22
  • Washington onions will be hauled to Utah to kick that season off; Utah-grown onions will hit the market in early September
  • Expect elevated prices through August
Potatoes:

Remaining Idaho storage supplies are nearly depleted.  The few remaining sheds Burbank supplies will empty out their final storage facilities by early next week. The next few weeks will be the most challenging for ordering potatoes on record. Historic pricing levels will be met daily.

 

Remaining Storage Stocks

  • Most Idaho suppliers are experiencing a supply gap between storage and new crop
  • A limited number of order shipments will occur each day to retain as many stocks as possible
  • Sheds with product need to slow production to stretch volume out over the next few weeks and avoid a supply gap
  • Daily size substitutions will be required for best order fulfillment; expect requested ship dates to be adjusted for allocation
  • 40- to 80-count stocks remain extremely limited; 90- to 120-count supplies continue to tighten

 

New Crop Potatoes

  • New crop production is underway in Washington
    • Volume is low
    • Washington may supplement supply shortages in Idaho; however, due to small size and currently limited supply, this has not been a viable option yet
  • A few Idaho suppliers in the central part of the state have begun to harvest in a very limited manner
  • The bulk of Idaho production will begin the week of August 22
  • Idaho and Washington growers anticipate early season yields to be dominated by 70- to 90-count potatoes
    • Size profile is not expected to increase until September; there will be limited 40- to 60- count potatoes available
    • U.S. No. 2 production will be low until potatoes are shipped out of storage, as supplies look their best straight out of the field
  • Colorado and Wisconsin production will begin in September
  • Limited quantities of Texas potatoes are forecast to ship the week of August 15
  • Expect elevated markets and supply struggles to persist into September
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Squash:

East Coast supplies are tightening due to recent weather. Markets are up slightly.

 

  • East Coast volume and yields (out of Michigan, Ohio, New Jersey, and New York) are limited this week due to past rain/hot weather
    • Zucchini quality is good with some minor scuffing visible; yellow squash quality is average
    • Rain and cooler temperatures this week will limit supply in the Great Lakes region
    • North Carolina will start new fields at the end of August
  • California has steady volume out of Santa Maria and will ramp up over the next week as they work new fields; quality is very good
  • The Baja Peninsula has limited supply as some growers have finished until mid-September
  • Expect markets to increase slightly over the next week
Strawberries:

Supplies continue to tighten; markets are climbing. Expect stocks to continue to decline over the next two to three weeks as the Salinas/Watsonville season is past peak production.

 

Salinas/Watsonville

  • Markon First Crop (MFC) Strawberries are available
  • As the season moves past its peak, stocks continue to diminish
  • Quality will improve as ideal growing temperatures are forecast this week
  • Size currently ranges from small to medium (20-24 per one-pound clamshell)
  • Expect markets to continue rising over the next 7 to 10 days

Santa Maria

  • Stocks are declining as fields move past peak production for the spring crop and into the summer season over the next two weeks
  • Quality will improve as ideal growing temperatures are forecast this week
  • Expect markets to continue climbing over the next 7 to 10 days

 

From The Fields: California Weather Update Many California growing regions including the Salinas Valley, Santa Maria, and Oxnard continue to experience temperatures and humidity levels that are consistently above seasonal averages. Although coastal areas will remain in the 60s to mid-70s, the bulk of inland areas within these regions will see temperatures in the upper 70s to low 90s this week. The combination of high humidity and elevated temperatures has been wreaking havoc on commodity and value-added lettuce and tender leaf items in particular. The forecast calls for little or no relief throughout the month of August, which will prolong many of the quality and supply issues mentioned below.   Markon inspectors have been observing the following issues/concerns in lettuce items:
  • Bolting/seeder
  • Internal burn
  • Insect pressure
  • Sun scald/sun burn
  • Mildew pressure
  • Inconsistent growth/fluctuating density
  • Shortened shelf-life
Tender leaf items are also susceptible to stress from heat and humidity, and have been exhibiting some of the following issues
  • Bolting/seeder
  • Decreased volume/yield
  • Inconsistent growth
  • Insect pressure
  • Shortened shelf-life
  • Supply shortages specific to cilantro)
Maintaining the cold chain throughout distribution is critical for maximizing quality and shelf-life. Markon inspectors will be monitoring quality and working with suppliers to select the best product available.   Labor Day Schedule 2022 Markon’s buying office will be closed for Labor Day (Monday, September 5); many processors will adjust loading and production schedules due to the holiday.  
  • Markon’s consolidation dock (Misionero, located in Salinas, California) will load as normal
  • Taylor Farms’ loading docks will have regular loading hours
  • The 4Earth consolidation dock will have regular loading hours on Labor Day (Monday, September 5)
o    The Los Angeles Produce Market will be closed o    4Earth will not be able to purchase off the market
  • Northwest shippers’ sales offices and loading docks will load by appointment only on Saturday, September 3, but will be closed Sunday, September 4 and Labor Day (Monday, September 5)
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