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Persistent rains in Florida are limiting the tomato harvest. Tomato shipments from the state last week fell 33% from the previous week and were 10% less than the same week last year. Imports from Mexico were subpar as well. These factors may continue to support the tomato markets in the near term. The lettuce markets, in contrast, are on the decline as the respective harvests improve. History suggests, however, that the iceberg lettuce market could firm during June with a five-year average increase price change up 7.3% from May.
Rising fuel prices are encouraging soybean oil for biodiesel and corn for ethanol use. Although ethanol demand for corn growth is forecasted by the USDA to be tepid at just .5%, soybean oil use for
biodiesel is projected to climb 10%. This may underpin soybean oil prices some during this summer.
U.S. milk output expansion has slowed. During April, milk production was just .6% larger than 2017 due to a .5% gain in milk per cow yields and a .1% larger milk cow herd. The year-over-year expansion in milk output was the smallest in over two years. Milk farmers also reduced the herd from the prior month by 2,000 head. Milk farmer margins have improved this spring which could bring a modest boost to year-over-year milk production gains in the coming months. Butter prices may be firm in the near term due to solid exports, while cheese prices may be sideways.
Beef production last week increased 1.8% and was 9.3% larger than the same week in 2017. It was the biggest cattle slaughter for any week since December 2011. Abundant beef supplies are meeting the uptick in seasonal demand coming from grilling activity. Last week, forward beef sales 22-90 days out, were the lowest for any week since December. This suggests that downward pressure on the beef markets should materialize in the coming weeks. Boneless beef stocks on April 30th were 4.6% better than a year ago. Look for the ground beef markets to peak soon. Since 2013, the average move for the 81/19 ground beef market during the first three weeks of June was down 9.6%.
Pork output last week was up 1.4% and was 5.6% larger than a year ago. Abundant hog supplies are available for slaughter which will keep pork production running above year ago levels into the summer. April 30th pork holdings were 8.7% bigger than the prior year with bellies (93%), trim (42%), picnics (40%), loins (6%) and ribs (6%) all higher. Belly stocks were the best since May 2016. This could temper seasonal price gains for the various pork items. Since 2013, the average move for the USDA pork cutout during the next five weeks was up 10%.
For the week ending May 12th, chicken production was .6% more than the prior week but was .8% smaller than the same week last year. The six-week running total of chicken output is just .6% more than 2017. Recent data hints that year-over-year chicken output growth could lessen later this year. The May 1st broiler layer flock was 4.3% bigger than last year, but above average egg hatch losses are a problem. Wing prices are at levels not seen since August 2014. April 30th chicken wing inventories were 16.3% more than 2017 and the highest in four months. But, history says the downside price risk for wings during this time of year is small. Conversely, the ARA boneless skinless chicken breast index usually peaks for the year during this week.
Shrimp imports remain solid. During March, the U.S. imported 12.4% more shrimp than the previous year. The U.S. dollar value has recently climbed to multi-month highs. Further, shrimp prices in the U.S., although below 2017, are attractive for exporters. These factors should continue to fuel strong U.S. shrimp imports and temper prices into the summer.
Nearby WTI crude oil futures recently traded to a 42-month high. Strong U.S. and global economic activity coupled with growing geopolitical tensions in the Middle East are supporting the market. Yet, a downside correction for crude oil is due.