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The avocado markets have been fairly firm as of late due in part to increased demand for the Cinco de Mayo celebrations. Strong year over year imports from Mexico have tempered the upside in prices causing them to track significantly below 2017. According to the Hass Avocado Board, avocado supplies could seasonally tighten up some in early June. The Hass 48 count avocado market in June has been above May in each of the last five years by an average of 14%. Tomato prices are typically higher in June as well.
The 2018 planting season is gaining steam with 39% of the corn, 30% of the spring wheat and 15% of the soybeans in the ground as of May 6th. Although corn and spring wheat planting remains behind, farmers are expected to recover in the coming weeks. This could weigh on the grain markets.
Strong U.S. export demand continues to support butter prices. During March, the U.S. exported 148% more butter than the previous year while imports were down 18%. The export total was the biggest for any month since December 2014. This could support butter prices in the near term. However, improving milk production margins across the globe should encourage milk and dairy product production in the coming months which should limit the upside in butter prices. Cheese price appreciation may be limited as well. U.S. cheese exports in March were 9% more than 2017.
Beef production last week rose 3.3% and was 8.3% larger than a year ago. Beef output is forecasted to trend well above 2017 levels for the foreseeable future. Beef prices are increasing with buyers becoming more active. Spot beef shipments during the last four weeks were 14.1% more than last year. Forward beef sales 22-90 days out were 13.8% better than 2017. This suggests that further price gains for steak cuts and ground beef will likely occur. Since 2013, the average move for 81/19 ground beef market over the next three weeks was up 9.6%. Yet, forward ground beef prices are at a 7% discount to the spot market which hints that this year’s seasonal appreciation may be tempered.
Pork output declined 1.2% last week but was 4.2% greater than the same week last year. The USDA is estimating pork production to be notably above year-ago levels into the summer which should limit seasonal price appreciation. That said, the pork belly market may be susceptible to an upward correction due in part to wholesale prices being the lowest since September 2016. Further, big retail feature activity for bacon is anticipated. U.S. pork exports during March were 2.9% stronger than the previous year and a record high.
For the week ending April 28th, chicken production fell .2% from the prior week and was down 1.7% from the previous year. The six-week total of chicken output was just .6% better than 2017. Spot feed costs last week for producers were the costliest for the week since June 2014. If this persists, it could hurt profit margins and temper expected year-over-year production gains this fall. U.S. chicken exports during March were .1% less than a year ago and the second smallest for the month since 2012. Higher leg quarter prices played a role in the lower export sales. The chicken wing markets are pricing at the lowest levels for this time of year since 2014. Since 2013, the ARA chicken wing index in May averaged 2.5% lower than it did in June.
Solid salmon imports continue to weigh on the salmon markets. During March, the U.S. imported 16.5% more salmon than the previous year. Salmon imports from Canada, however, remained subpar down 4.8% from 2017 at an average price 4.2% more expensive. Canadian salmon may continue to carry a premium to other markets during the next several months.
The crude oil markets have firmed over the last week with nearby WTI crude oil futures reaching the highest level since November 2014. Geopolitical tensions are rising in the Middle East. Still, the downside risk from here should be respected.