Freshly Picked, May 2, 2019

Produce

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The tomato markets are trading at engaging levels.  This is due in part to strong imports from Mexico.  But supplies from Mexico are uncertain after May 7th when the U.S.-Mexico tomato suspension agreement expires. Assuming a deal is not had, buying tomatoes from Mexico will no longer come with a floor price but is expected to include a tariff of 17.6%.  There is a risk that Mexican growers will limit supplies in the months following which may be supportive of tomato prices in the U.S.   The tomato markets could be especially volatile during the next few weeks. 

Grains

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The U.S. winter wheat crop continues to progress under favorable conditions.  As of April 28th, 64% of the crop was rated in either good or excellent condition by the USDA.  This compares to 33% the same week last year and is the best rating for any time during the spring in nearly a decade.  Wheat prices could bottom soon, however. 

Dairy

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U.S. milk production has been tempered as of late.  During March, U.S. milk output was down .4% from the previous year due to a .9% smaller milk cow herd and a .5% rise in milk per cow yields.  Farmers reduced the herd by a net 10,000 head making it the smallest since the fall of 2016.  Year-over-year milk production gains are likely to remain lackluster in the near term.  However, improving margins for milk farmers should lead to better milk production expansion later this year.  The cheese and butter markets are relatively range-bound and could remain supported during the next month. 

Beef

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Beef production last week rose .5% from the previous week and was 3.4% larger than the same week last year.  Cattle slaughter was the largest in four months.  But rising demand is lifting the beef complex which is not unusual for this time of the year.  The five-year average move for the choice boxed beef cutout during the next three weeks is an increase of 3.3% before it tops for the year.  March 31st boneless beef stocks in the U.S. were 6% less than the previous year due in part to a strong drawdown in stocks during the month.  Lean beef trim prices could remain firm during the next few months.  

Pork

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U.S. pork production is seasonally declining.  Last week, output fell 1.6% from the previous week and was .5% less than the same week last year.  Much better year-over-year gains in pork production are anticipated during the summer.  But this may be offset in part by stronger exports.  March 31st domestic pork holdings were down .2% year-on-year with ribs (2%), trim (1%), and bellies (1%) down as well.  But bellies expanded in March by the second largest amount for the month since 2013.  Still, belly prices are likely to firm in the coming months.

Poultry

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Chicken production expansion remains limited.  For the week ending April 20th, output fell 2.7% from the prior week and was 4.1% less than the same week a year ago.  The six week running total of chicken output is just 1% better than 2018 due to a 1.9% gain in slaughter and .9% lighter bird weights.  The broiler type chick hatch in March was just 1.2% better than last year while pullet placements into the broiler hatchery flock were larger by 1%.  The April 1st broiler layer inventory was better than 2018 by just .2%, and models signal that notable improvements there may not occur until July.  This suggests that tempered chicken output may persist throughout the spring.  

Seafood

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U.S. snow crab imports during February were a whopping 71.8% larger than the previous year.  The Canadian snow crab fishing seasons are underway with 38% of the Newfoundland quota landed.  Although the combined Newfoundland and Gulf of St. Lawrence quotas are 10.8% larger than last year, they are historically small.  Inflated snow crab prices should persist.

Oil

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The average on-highway diesel fuel price last week climbed for the fourth consecutive week to its most expensive level since December.  Diesel prices usually remain firm into early July before topping for the year.  Limited world crude oil output may temper any seasonal downside in diesel prices this summer.  

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