The Dish Market Report – July 12, 2018

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The Farm


For the week ending June 30th, chicken production rose 1.2% from the previous week. Year to date weekly chicken output is tracking only modestly above last year. However, chicken output this summer is forecasted by the USDA to be 1.9% better than last year. Chicken wing prices remain well below year-ago levels. But, the weekly ARA Chicken Wing Index has climbed to its highest level in six weeks. Because chicken wing prices are carrying the smallest premium over chicken breasts, history says that the greater risk for wings is to the upside. U.S. chicken exports during May were down 4.3% from the previous year and were the smallest for the month since 2014. Chicken leg quarter prices usually trend lower during the late-summer.



Beef output last week was shortened due to the holiday, falling 12.7% from the previous week, but was up 1.5% versus the same week last year. According to the USDA, Q3 beef production is forecasted to be 2.4% better than 2017 which is expected to influence the various beef markets lower in the coming weeks. However, food service companies are planning heavy beef feature activity in the late summer and early fall. This could cause some supply gaps to occur later this year and provide support for beef prices. In the near term, the beef markets usually come under pressure. Since 2013, the average move for the choice ribeye for the next three weeks, including this week, was down 12.2%.



Pork production last week declined 11.7% due to the holiday but was 6.7% better than the same week last year. Pork output is projected to track 4.2% above the previous year levels during this summer. Trade tariffs on U.S. pork, especially on hams to Mexico, are expected to temper demand. These two factors should weigh heavy on the pork markets as the fall nears. Still, solid pork exports have occurred so far this year. U.S. pork exports during May were up 2% from last year with ta rade to Mexico higher by 8.4% and a record high for the month.


The Sea


The salmon markets have traded near 2017 levels during the early summer. Total U.S. salmon imports during May were down 16% year on year. However, U.S. Atlantic salmon imports were up 28% from 2017. A higher value of the U.S. dollar is expected to cause fairly solid salmon imports to persist. This should mitigate the upside in the salmon markets.



The Garden


The lettuce markets have eased during the last week due in part to holiday slowed demand. Iceberg lettuce shipments last week were down slightly due to the holiday as well but were still 8% bigger than the same week last year. History suggests that there could be some modest downside for the iceberg lettuce market in the near term. The USDA is forecasting 2018 U.S. fall potato acreage to be slightly bigger than last year. The fall Idaho potato crop could be up north of 4% from last year.



The Kitchen Sink


The butter market has weakened during the last week. This, despite strong butter exports in recent months. During May the USDA exported more than double the amount of butter exported the prior year. Still, the U.S. was still a net importer of butter during the month. Further, the international butter markets have appeared to peak. And finally, domestic butter consumption has been disappointing this spring. U.S. butter disappearance was 6.2% less than in 2017. These factors could temper any summer butter price increases. The cheese markets may remain erratic.



Trade issues continue to weigh heavy on the soybean complex. China has threatened tariffs on U.S. soybeans for the last several months. This country typically accounts for half of U.S. soybean exports and 25% of the U.S. crop. The tariffs could keep a lid on the soybean complex during the summer.





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Although nearby WTI crude oil futures last week priced at a new 44-month high, prices have since turned lower in recent days. Saudi Arabia raised their daily crude oil output in June by 500k barrels. Crude oil prices will remain volatile