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For the week ending August 3rd, weekly young chicken harvests continued to run over a year ago, for the first time since early June, bird weights dipped below the year prior. Still, RTC production remains over a year ago, with the six-week total holding near 5% above last year. Wing and dark meat prices remain elevated while breast meat and tenders have been sliding. Anticipate a modest pullback in chicken production given early summer chick placement data, but the window is closing on those expectations. Egg prices have begun to rise, and our expectations are for egg prices to further increase as the egg layer flock declines in response to worsening margins.
Last week’s cattle production estimate (ultimately reported at 642k head) was revised lower on Monday, following a late-Friday fire in Tyson’s Holcomb, Kansas beef packing plant. Anticipate the loss of one of the largest beef processors to push beef prices higher until the approximate 6% to 7% of beef production lost is replaced. Just through the first two days of this week, the Choice boxed beef cutout is up more than $0.10 from Friday’s close, with much of the increase centered on the middle meats and grinds. Expect further price volatility in the near term as the need for remaining Labor Day demand will take priority.
The sharp year-over-year gains on weekly hog harvests have eased, with last week’s total coming in just .6% over last year. Still, heavier hog carcass weights continue to add to production, as seen in last week’s 492.7 million pounds of pork produced, up 1.2% from a year ago. Higher ham and belly prices have boosted the USDA pork cutout value, but the higher prices became disengaging for end users. Pork prices have now begun to fall and may weaken into late-August. Pork trim prices have finally started to drop and may still fall into September.
Snow crab prices remain historically expensive. U.S. snow crab imports in June were 3.2% bigger than the previous year, but tight world supplies are supporting the markets. The Alaskan Bering Sea snow crab season will get underway this fall with the bulk of the catch likely to be landed in the winter. However, this year’s Alaskan quota is expected to remain historically low. Inflated snow crab prices are expected to persist.
The Idaho potato markets remain expensive, with the average 70 count price at its highest level since the summer of 2017. The Idaho potato crop is progressing well, with 89% of the crop rated in good or excellent condition. Washington (60%) and Oregon (50%) potato crops are not rated as highly. History suggests that sharply lower Idaho potato prices should be forthcoming. The five-year average move for the 70 count Idaho potato market during the next six weeks is a decline of 44%. Avocado prices could find support soon.
THE KITCHEN SINK
The cheese markets remain firm, with block prices the highest in 33 months. The USDA is estimating that Q3 domestic milk production will be down .2% from last year. But, Q4 milk output is forecasted to be .8% better than 2018. Cheese prices may have more upside potential in the near-term but usually top in late-August. Spot butter prices were steady this past week and are near year ago levels. Cream supplies for butter manufactures have been tight but are expected to loosen up as ice cream manufacturing backs off. History hints that butter prices should seasonally peak next month.
The USDA released their latest corn and soybean crop production forecasts this week, with both coming in well above expectations. The corn crop is projected to be 3.4% smaller than last year, but supplies are forecasted to be sufficient. Similar story for soybeans. Corn prices could move lower in the near-term, but crop risks remain.
Nearby natural gas futures were firm since last week. Per the EIA, (as of August 8th) total U.S. domestic natural gas stocks were 4% smaller than the five-year average for the date. Natural gas futures haven’t priced notably below $2.00 since 2016.