Freshly Picked: June 21, 2018 Market Report
Alerts & What’s Trending
The Idaho potato markets have been relatively stable as of late. June 1st U.S. potato holdings were 9% more than the previous year. Idaho potato stocks were better by nearly 10%. This and favorable growing conditions in Idaho could temper the seasonal upside potential in potato prices in the near term. But, sharply lower Idaho potato prices are anticipated in the late summer and fall. Lettuce prices have firmed. Iceberg lettuce shipments last week declined sharply from the prior week but were still slightly better than the same week last year.
Trade disputes between the U.S. and several trading partners including China and Mexico have caused countries to institute new tariffs on U.S. grains. This factor and nearly ideal weather for the corn and soybean crops are likely to continue to weigh heavy on the grain markets in the near term.
Milk production expansion remains lackluster. During May, U.S. milk output was just .8 % bigger than last year due to a slightly larger milk cow herd and a .7 % gain in milk per cow yields. Milk farmers added a net 2,000 head to the herd during the month. Higher milk prices in recent weeks have provided the opportunity for farmers to hedge by selling futures and locking in decent profitability. This could cause year-over-year gains in milk production to improve in the coming months. Mexico recently announced a new tariff on U.S. cheese which could weigh on prices.
Beef production last week was 3.6% larger than the same week last year. Near slaughter-ready cattle, supplies are expected to remain readily available this summer. Currently, October cattle futures are at a 4.1% price discount to the June contract. So, lower beef prices should occur in the coming weeks as well. Forward choice ribeye (15%), choice short loin (25%) and ground beef (11%) sales for delivery 22-90 days out are pricing this week at a discount to their spot markets. U.S. beef exports during April were up 16.2% from last year and were a record for the month. Continued solid exports could temper the seasonal price weakness that usually occurs from Father’s Day through the end of July.
Pork production last week fell 2.7% but was 3.8% larger than the same week last year. Tightening hog supplies are triggering pork output to seasonal fade but production is expected to pick up next month. The USDA is calling Q3 pork output to be 125 million pounds more than Q2 and to be 4.2% larger than a year ago. This is expected to influence the pork markets downward this summer. In May, the average retail bacon price was down 3.8% from a year ago and the lowest for the month since 2015. Wholesale pork belly prices usually remain firm into July.
Chicken production for the week ending June 9th was 2.2% smaller than the same week a year ago. The six-week average for chicken output stands at just .3% more than 2017. The USDA is estimating chicken production this summer to be only 1.9% larger than the prior year. If that occurs, it could limit the seasonal downside for the chicken breast markets and provide support for wing prices. The average retail boneless skinless chicken breast price for May was 4.1% cheaper than last year and the lowest for the month in over 12 years. If retail chicken breast prices don’t increase this summer, it may boost demand and support the wholesale chicken breast markets. History suggests the downside risk for large egg prices during this time of year is nominal.
Not surprisingly, U.S. snow crab imports in April were disappointing, down 15.4% compared to 2017 resulting in sharply higher prices. The Newfoundland snow crab fishing season continues but the quota at the Gulf of St. Lawrence area is at historic lows. This is anticipated to persist and should underpin snow crab leg prices into the summer.
Retail diesel fuel prices have fallen since May but last week was still up 30.3% from last year. Big U.S. trucking activity has persisted, but diesel fuel exports may get caught up in the agriculture tariffs. Lower diesel fuel prices may still materialize.