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For the week ending May 23rd, weekly chicken harvests were up modestly from the week prior but faded 5.5% from year ago levels. While slaughter was down, bird weights remain elevated relative to 2019, and total pounds of ready-to-cook chicken produced fell just 2.5% from last year. Tighter production schedules and escalating foodservice interest have underpinned prices across most of the bird, all except the leg quarter markets which continue to display weakness into this late spring. Chicken breast meat prices skyrocketed into mid-May, but have since retreated modestly. Chicken wing prices have more than doubled from their mid-April lows, but demand usually wanes during the summer. Wing prices should begin to fade some in the near term.
As expected, last week’s holiday shortened production schedule led to a modest decline on cattle throughput, but heavier carcass weights caused beef production to be down just 7.6% from the year prior. Anticipate slaughter to push back towards the 600k head area through mid-June, but reaching, or exceeding, year ago levels may be a bit further off. Beef prices continue to slide, with the Choice cutout falling below the $400 mark for the first time since late-April. Lower end meats and beef 50s have influenced the Choice cutout downward. Further losses are likely as the middle meats should weaken also.
Pork production was just 6.1% smaller than the year prior, but better output is expected during the summer. Solid pork supplies have weighed heavy on wholesale prices, with the USDA cutout fading for the second consecutive week. After being under pressure in May, the belly and ham primals have found some support but the remaining primals are beginning to weaken. Further downside price risk exists for the pork loin primal as heavy retail interest fades and consumers move back towards at least some food away from home meals this summer.
The Canadian snow crab fishing season is underway after delays brought on by COVID-19. As of May 29th, 33% of the Newfoundland snow crab quota had been landed. The Newfoundland quota this year is nearly 10% bigger than the prior season. World snow crab supplies are limited but slack food service demand has weighed on the markets. Snow crab price relief could occur in the coming months.
The potato markets have firmed from the lower levels earlier this spring. Food service demand is slowly improving, and stocks remain historically and seasonally low due to the short harvest last fall. Typically, the potato markets are firm into at least late-August. Notable potato price relief may not occur until then. The avocado markets have firmed during the last week. History suggests that the avocado markets could be steady to higher for the month of June. Still, lackluster food service demand could temper any notable upside potential.
THE KITCHEN SINK
CME cheese block and barrel prices are the costliest in eight months and six months, respectively. Continued buying for the food box relief program by the U.S. government is supporting prices. April 30th U.S. cheese stocks were a record high for any month. This factor and declining exports say the downside risk for the cheese markets should be respected. The CME spot butter market on Friday had the highest weekly close in 10-weeks. U.S. government buying is boosting butter prices also, but stocks are big. Butter prices are usually the highest in the summer, but this year’s seasonal rises may be less intense.
The food oil markets are starting to firm. Food service demand in the U.S. is improving. This factor and better food oil imports from China are helping support food oil prices. World food oil supplies are projected to remain historically limited. Thus, there may be more upside to food oil prices in the coming months.
After hitting the lowest level in 21 years in March, nearby RBOB gasoline futures have risen 186% (from that low). As the U.S. consumer increases driving activity this summer, expect further price support but still be under year ago market levels.