Freshly Picked, March 8, 2021

Alerts & What’s Trending

Produce

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The lettuce markets have firmed mostly during the last week but remain historically engaging for buyers. Iceberg lettuce shipments have actually been tracking below year ago levels as of late which adds fuel to expectations that the downside price risk in the lettuce markets from here is likely nominal.  The freight markets are jumping due to a limited supply of available trucks and improving demand.  As the economy continues to recovery, this could put a strain on shipping business which could cause continued volatile freight rates.  

Grains

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The food oil markets remain historically expensive.  World food oil supplies are projected by the USDA to be the tightest for the crop year in over a decade.  This could underpin food oil prices for the next several months although the futures markets are signaling that a top in the markets could be near. 

Dairy

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CME cheese block and barrel prices increased last week and were the highest since January. CME spot butter prices were up notably last week and were the costliest since July.  U.S. cheese exports in January were down 9.8% (y/y) and were the smallest for the month since 2017.  Domestic butter exports in January were down a whopping 78.8% (y/y) and imports for the month were down 27.4% (y/y). Domestic cheese prices have become significantly cheaper globally since January and is aiding exports. Food service butter demand is improving. The lower risk for cheese and butter prices right now is likely limited.

Beef

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Cattle throughput and beef production are robust as packers make their way through their larger inventories left from the winter storms in mid-February. While the USDA beef cutouts are now declining, packers last week were able to buy cattle steady to $1-2 lower (w/w) and that should continue to boost beef output.  Still, seasonal buying interest is expected to rise into late March, so the downside price risk will likely be limited heading into the early spring. The middle meats may weaken in the near-term, but fat trim prices should edge higher as restaurant buying emerges with more state level reopenings into April.

Pork

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Pork production faded last week, down 3.3% from the week prior and 3.4% under a year ago. Slaughter levels are likely to remain near 2.5 million head (per week) into the spring. The USDA pork cutout continued to firm last week with bellies and butts leading those increases but the ham primal was down sharply. There remains no relief across the trimming’s markets, with the 42’s moving into the mid-$0.40s while the 72’s pushed over a $1.00 last week.  Unfortunately, evidence of a break lower is absent and higher pork trim prices will likely persist.  

Poultry

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Actual slaughter data for the week of the winter storms (the week ending February 20th) was worse than expected, with slaughter down 43.6% from the year prior. Last week integrators were in catch-up mode, with the initial estimate, at 180.5 million head, 6.2% larger than a year ago being the largest harvest for any week since at least 2015. Price firmness remains across the bulk of the bird, with all the ArrowStream (parts) indexes heading higher last week (w/w). The leg quarter market is moving in a pattern like the wings so far this year, tacking on more than 24% in just the past six weeks. While the upside momentum for the tender markets has slowed, demand interest remains solid and there may be further price gains felt before seasonal losses reemerge.  

Seafood

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The salmon markets have firmed.  This is despite continued solid imports. During January, the U.S. imported 4.9% more salmon than the previous year. Salmon demand is anticipated to improve considerably during the next several months both domestically and abroad.  This could be supportive of the salmon markets especially during the second half of this year.  

Oil

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Nearby WTI crude oil futures finished sharply higher last week (w/w) and recently hit the highest level since October 2018. Improving (post-covid) economic activity and rising Middle East geo-political tensions will keep oil prices firm.