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For the week ending May 25th, weekly chicken slaughter jumped 2.9% from the week prior and was 3.2% better than last year. While continuing to fluctuate, bird weights moved back above a year ago which boosted production 4.7% more than last year. The six-week average for output was up 1.1% (yoy), and gains are expected to hold into July. Amid the larger production schedules, the Wholesale Chicken Index (USDA) has been fading but is still more than 5% over year ago levels. Aggressive wing and leg quarter prices are carrying the whole Bird Index, but wing prices are likely to decline into the summer. Leg quarter prices are expected to remain firm.
Last week’s holiday shortened beef output was 9% less than the prior week and was .2% below 2018. Amid the lighter slaughter schedule, beef prices escalated modestly from the week prior but remain near 2% below a year ago. Choice briskets are the largest standout of the carcass, with prices jumping near 6% week-to-week, and are running more than 20% over last year. Seasonally, briskets may have another two weeks of upside potential, but given the current high price structure, coupled with a continuation of out-front sales at lower money, sideways to lower pricing is likely to occur during the summer.
Pork production last week was up 5.8% over last year’s Memorial Day week. The belly market continues to struggle finding support, but history says to view it as a buying opportunity before the typical summer price rally. Ham prices are 35% higher than last year and are expected to continue to increase into July. Mexico has been a big buyer of US hams since the retaliatory tariffs have been removed. Still, there is a possibility for another set of tariffs to be put in place due to immigration policies which could occur as soon June 10th.
The Canadian snow crab fishing season is progressing. As of June 4th, 73% of the Newfoundland quota had been landed. The combined Newfoundland and Gulf of St. Lawrence quota is 10.8% larger than last year but still historically small. Expensive snow crab prices are likely here to stay as small Canadian and U.S. quotas are expected next year.
The tomato markets continue to trade at relatively engaging levels despite the 17.5% tariff on imports from Mexico and an additional 5% tariff set to begin on June 10th. For the most part, the U.S.’s reliance on tomatoes from Mexico will decline during the next few months as more product is domestically sourced. However, imports should begin to expand again in October which could be accompanied by lesser supplies and higher price levels. Avocado imports are subject to the 5% tariff on June 10th also.
The kitchen sink
The spot butter market is down slightly since last week but still near the recently established one year high. April U.S. butter production was down 3.9% from March and was 4.8% smaller than last year. Butter demand is solid. Since 2014, the average move for spot butter prices in the next four weeks was up 3.5%. Cheese block prices are firm this week, but barrel prices are down. April cheese output was 3.6% less than March but up .2% (yoy). Cheese exports have been active but may lessen due to weakening global cheese prices. Lower cheese markets in late-June is common.
Corn and soybean planting remain behind due to persisting adverse weather in the Eastern grain belt. As of June 2nd, just 67% of the corn crop had been sowed which is a record low for the date. The USDA is expected to reduce their corn crop estimate in the coming weeks. Feed prices should remain volatile this month.
Nearby natural gas futures fell a whopping 8.8% since last week, the lowest since June 2016. Cooler temperatures are occurring for a big part of the U.S which is tempering natural gas fired electricity demand. The quarterly pivot model suggests that nearby natural gas futures could target $2.250 before July.