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Lettuce supplies tightened during most of September. However, the iceberg lettuce harvest appears to be improving. Total iceberg lettuce shipments last week rose 7.7% from the prior week and were 8.6% larger than a year ago. Rain this week could shorten the harvest some but further improvement is anticipated thereafter. History suggests, however, that lettuce prices could remain firm. The average case price for iceberg lettuce during October has been above September in each of the last four years. The Idaho potato markets remain depressed but the downside price risk from here is likely only nominal.
Food oil prices have been on the increase as of late. Nearby soybean oil futures climbed to their most expensive level since June this week. World food oil supplies are ample. Further, U.S. soybean trade is expected to suffer in the coming months. These factors should limit the upside potential in food oil prices.
The CME butter market remains fairly steady. Butter demand has been solid, but stocks are adequate. As of August 31st, U.S. butter holdings were 3.8% bigger than last year and the second largest for the date since 1993. History suggests that lower butter prices could be forthcoming. The five-year average move for the CME butter market from this week through the end of the year is a decline of 13.4%. The CME spot cheese markets remain far apart with blocks at the steepest level above barrels in several years. This suggests that the upside price risk in cheese blocks from here is nominal.
Beef production last week fell .9% from the prior week and was .1% smaller than last year. Current cattle numbers in feedlots are abundant which is expected to boost beef output. The USDA is forecasting Q4 beef production to be 4.8% stronger than last year. Beef demand has been solid, especially from exports, but the deferred CME monthly live cattle futures are priced notably above the spot market which should temper forward beef sales. Since 2013, the average move for the choice ribeye market during the next nine weeks has been 24.9% higher. But, this year’s remaining price appreciation for ribeyes could be less intense, and the seasonal peak will likely arrive earlier than usual.
Pork output last week rose 9.8% from the prior week and was .5% more than a year ago. Hog slaughter was a new weekly record. The USDA reported that the September 1st U.S. hog and pig inventory was 3% larger than 2017 and the biggest for the date since 1998. The breeding herd rose 3.5% (yoy), so look for big hog supplies this fall. Pork output this quarter is projected to be 6.3% larger than last year. The pork markets usually weaken from mid-October through year-end, but this year’s seasonal drop may be limited if African swine fever worsens.
For the week ending September 22nd, chicken production grew 1% from the prior week, but was 2.3% smaller than the same week in 2017. Chicken demand has been lackluster despite the lower wholesale chicken markets. Solid beef demand is likely tempering chicken consumption. The ARA Chicken Breast Index is the lowest for this time of year since at least 2005. The ARA Chicken Wing Index is the cheapest for any week in early October since 2011. Yet, because value is becoming more apparent, it could temper the seasonal chicken price declines that typically occur in Q4. The large-shell egg market usually peaks soon. Since 2013, the average move for the Southeast large-shell market during the next three weeks, including this week, was down 16.1%.
Snow crab prices remain inflated due to the tight world supply brought on by lower quotas in both the U.S. and Canada. Alaska will publish their 2018-19 Bering Sea snow crab quota soon. Expectations are for their quota to be up significantly based on the latest stock assessments. Lower snow crab prices could occur as next year progresses.
The EIA’s most recent weekly national average retail diesel fuel price was the costliest since January 2011. The strong U.S. economy and tightening oil supplies due to sanctions on Iran could keep diesel fuel prices firm in the near term.