The Dish Market Report, May 9, 2019

top of mind news

the farm


Chicken production has been on a decline since mid-April, with year-over-year gains turning to moderate losses. For the week ending April 27th, chicken output was down 1.3% year-over-year, but during late-March into early-April gains kept the six-week rolling production average up 1.5% (yoy). Producer margins continue to improve and are expected to foster an increase in production heading into the summer. However, in the near-term chicken output is anticipated to remain mostly steady with a year ago. The chicken wing markets have been relatively firm, holding above $1.90 since late March, but seasonal price weakness is still expected to occur heading into the summer.



Last week’s cattle harvest was up 2.8% from the prior year at an estimated 670k head, the largest weekly slaughter since September 2011. Carcass weights have rebounded nicely from sharp year-over-year declines which pushed beef output 3.5% over last year. The increasing production has weighed heavy on beef prices, pushing the Choice cutout more than 3% lower from the prior week. Still, a move higher for beef is expected post-Memorial Day, with interest mounting ahead of the Fourth of July. Prices on the beef 50’s may have formed a seasonal top in the low $0.90’s and may leak even lower into the late summer.



Last week, pork production was up near 2% week-to-week, and was 2.5% larger than last year. Seasonally, pork output is slated to decline into the summer months which should be supportive of the USDA pork cutout into early-July. Seasonally, the pork cutout usually moves near 19% higher from now into early-July. As BLT season arrives, bacon prices as well, will begin to rise. This summer’s seasonal move higher for pork bellies could be more intense than the more recent April rally. ASF is a concern and many are focused on the trade deal with China.



The Sea


Shrimp prices continue to track below 2018 levels despite lackluster imports during the winter. For February, U.S. shrimp imports were 10.1% less than the previous year. A strong value of the U.S. dollar should encourage imports in the coming months. But if not, the shrimp markets are likely to track much closer to and even above year ago levels.



The Garden


Tomato prices have firmed in recent weeks but remain historically attractive. However, the U.S. instituted a 17.5% tariff on imports of tomatoes from Mexico this week. The tariff is expected to remain in place until a new tomato suspension agreement can be executed. This may take some time, and tomato prices could become especially volatile in the near term. Last week, Mexican tomatoes accounted for nearly 45% of the supply in the U.S. Avocado imports from Mexico have been subpar as of late.



The kitchen sink


The cheese markets continue to trend higher. Cheese barrels are the most expensive since October 2015. Cheese demand has been healthy. In March U.S. cheese production was 11% more than February but was .7% smaller than the previous year. The cheese markets could still rise in the near term, but former price resistance has occurred near $1.750. Spot butter prices have found modest support lately. Butter output in March was 6.3% stronger than February but was down 3.8% from last year. History suggests that the downside risk for the butter market during this time of year is nominal.



U.S. corn planting remains behind with just 23% of the crop in the ground as of May 5th. This marks only the fourth time since 2000 that corn planting was below 30% after the first week of May. The other three years generally produced adequate crops. Still, the corn market could establish a short-term bottom relatively soon.




After hitting the highest level in six months during April, nearby WTI crude oil futures have fallen 6.9% from that point. Despite OPEC staying true to their oil production cuts, U.S. crude oil output remains historically high. But, growing geopolitical tensions in the Middle East could support crude oil prices from here.