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Adverse weather continues to shorten lettuce supplies. Iceberg lettuce shipments as of late have been tracking 9% below year ago levels. Further, the quality has been erratic. The iceberg lettuce market has risen sharply during the last few weeks as a result. Lettuce prices are expected to remain firm in the near term. However, demand is likely to back off considerably at these prices levels which could temper any further market upside potential. The tomato markets have recently firmed and may remain so in the near term as well.
The wheat markets have been erratic for most of the last few months with the higher protein classes of wheat trading below the low protein classes at times. Due in part to changing world trade patterns over the last several years, the typical premium for protein in wheat is likely to remain minimal.
CME cheese block prices showed signs of weakening last week while cheese barrel prices found some support. Still, the cheese block price premium over barrels remains historically large. Per the USDA, August cheese inventories were up 1.0% (y/y) but the monthly drawdown was below the five-year average. Expect the cheese markets to remain volatile. CME spot butter prices averaged higher last week (w/w) and are the lowest for September since 2013. August ending butter stocks were 22% larger than the prior year and it was the first August build since 1990.
Beef production picked up last week, with the week to date total, at 546.6 million pounds, up 1.2% (w/w) and 2.0% more than last year. Packers look to be trying to cement the seasonal low on the wholesale beef markets, with last week’s USDA Choice cutout rising modestly from the week prior. The middle meats are appreciating, with the trim and grinds contributing to the higher move, as well. While this price upswing is a few weeks ahead of seasonal expectations, increases may carry well into late October to early November. Domestic 90s prices are weakening, and additional downside is likely deep into the fall.
Lighter year-over-year pork production, at 552.6 million pounds last week, continued to support the wholesale pork markets. Belly and ham prices have been the largest benefactors of the recent strength, with bellies closing last week in the $1.500 area while the ham primal has more than doubled since early August. Exports remain active, and the most recent Hogs and Pigs report confirmed expectations for smaller out-front farrowing intentions. But market hog availability was reportedly larger than the trade was expecting. Q4 pork output may fade.
Total chicken slaughter for the week ending September 19th fell 2.7% from the year prior, but bird weights remain record heavy for this time of year. The six-week total of ready-to-cook (RTC) broiler production is down just 0.2% from a year ago, and tighter production schedules appear to finally be underpinning prices. USDA leg quarter prices have risen but remain at multi-year lows. Breast meat prices are declining, seasonally, and tender prices likely put in a top, as well. Chicken wing prices remain firm ending last week over the $2.100/lb. and are the costliest since 2017. Tighter production schedules should continue to support the chicken wing markets in the near term.
Foodservice activity has continues to expand, however that expansion has slowed considerably during the late summer and early fall. Thus, recovery in demand for seafood products including salmon and shrimp may stall in the coming weeks. This should mitigate any upside in seafood prices during the early Fall. That said, the risk in these markets for 2021 could be to the upside.
Last week’s national average retail diesel fuel price was $2.404/gal. which was 19.5% less expensive than the same week last year and the lowest for September in four years. This is good news for food service shipping costs, but diesel fuel prices could appreciate if the U.S. economy continues to improve this fall.