The Dish Market Report – August 30, 2018

Top of Mind news


The Farm


For the week ending August 18th, chicken production increased 2.2% from the previous week, was 5.1% better than last year and a record.  The six-week total of chicken output is 2.6% above 2017.  Broiler slaughter in the last six weeks has trended 1.6% above last year while weights have been 1% heavier.  The broiler type chick hatch in July was 2% bigger than a year ago which suggests that annual chicken production gains are likely to occur in the coming weeks.  The number of broiler layers grew 2.2% during July, but it was the smallest year-over-year gain since March 2017.  A tightening broiler layer supply could temper chicken output gains this winter and support prices.  In the near-term, expect chicken wing prices to seasonally rise in September.


Beef output last week declined 3.3% from the prior week and was 2% smaller than the same week last year.  The August 1st cattle on feed inventory was 4.6% larger than the previous year.  Cattle placements into feedlots during July were up 7.9% from last year, but the average placement weight was down 1.1%.  The USDA anticipates Q4 beef production to be 4.8% more than 2017.  This should temper seasonal price gains for holiday items such as ribeyes during the fall.  Since 2013, the average move for choice ribeye prices from late-September through November was up 24.8%.  Retail beef prices in July were .4% more expensive than June but were only up .1% compared to last year.




Pork production last week was up 3.3% and was 7.7% larger than the same week in 2017.  Hog supplies are numerous and expected to keep pork production active.  The USDA is projecting Q4 pork output to be 6.3% more than last year which should aid seasonal price declines this fall.  There was no news with African swine fever in China, but this is being monitored closely as it may boost demand for U.S. pork.  July 31st pork belly stocks were up 119% versus 2017.  Pork belly prices are the cheapest since May 2015, but the downside risk from here is small.



The Sea


The inflated U.S. dollar has continued to encourage solid salmon imports.  During June, the U.S. imported 9.9% more salmon than the previous year.  However, world prices have risen due in part to tighter supplies.  The salmon markets may remain above 2017 levels into the fall.  But, solid imports are anticipated to temper the upside risk in salmon prices.




The Garden


Lettuce supplies are adequate which is helping pressure lettuce prices lower.  Iceberg lettuce shipments last week did decline 3% from the previous week but were still 2% better than last year.  History suggests that the downside potential in lettuce prices from here may only be modest, however.  The five-year average move for the iceberg lettuce market during the next four weeks is an increase of 33%.  Tomato prices have been on the rise during the last week but history signals that the markets may remain range-bound during the next month.



The Kitchen Sink


The cheese markets have firmed which isn’t unusual for August. As the school sessions begin, milk is diverted away for product production. Further, milk output is seasonally slow due to warm temperatures. July 31st cheese holdings were 3% larger than last year and a record for any month. Further, the cheese stock build during the month was the second largest for any July since 2011. Ample supplies and fading international prices could limit any further cheese price gains. July 31st butter stocks were also 3% better than the prior year and the second largest for the month since 1993.




The Trump Administration recently announced aid programs for farmers suffering from the trade issues. Soybean farmers will receive a $1.65 per bushel credit on 50% of their production while corn ($.01) and wheat ($.14) farmers will receive much less. If longstanding, this could put downward pressure on soybean prices.







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The Brazilian real has depreciated 19.7% this year versus the greenback, providing a bearish bias over the soft markets. Brazil is having their presidential election this fall which may keep their currency volatile. But, an upward correction is overdue.