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The tomato markets remain relatively inflated. The chief growing area in the east has transitioned to the Palmetto, Florida region which is anticipated to produce solid volumes in the coming weeks. However, Mexican shipments are down. Last week, the U.S. tomato imports from Mexico fell 18% from the previous week and were 19% less than the same week a year ago. This may continue to support tomato prices during the next few weeks. History suggests that tomato prices could remain expensive through the end of the year. The Idaho potato markets continue to price below year-ago levels.
Soil moisture conditions for the domestic winter wheat crop have improved considerably this fall. As of October 28th, 53% of the 2019-20 U.S. winter wheat crop was rated in either good or excellent condition. This compares to 52% last year. Forecasts for favorable weather could weigh heavy on wheat futures in the near term.
CME cheese prices have been range-bound but increased demand for the holiday season usually supports prices in the near term. September 30th cheese stocks were 4.5% larger than last year and a record for the month. Cheese holdings grew for the month for the first time since 2012. Since 2013, the average price move for cheese blocks from early November through the end of the year was down 13%. The butter markets have been steady. September 30th butter stocks were 10.7% more than last year and the biggest for the date since 1993. Butter prices usually rise over the next six weeks.
Last week’s cattle slaughter came in at an estimated 633k head, only slightly larger than last year. But, heavier carcass weights boosted total beef output 1.3% from 2017. Larger kills are expected to increase beef production in the coming weeks as packers move aggressively to fill robust export commitments and solid forward sales obligations. This should support beef prices in the near term. Stronger cattle placements earlier this year, but at lighter weights, continue to portend available market-ready cattle into late Q1. However, seasonal beef demand, especially for ground beef, this winter is likely to absorb the large beef supplies at lower prices than what were in place a year ago.
Pork production fell 0.7% last week but was 4% larger than the same week in 2017. It was the second biggest slaughter week this year. Additional record-setting hog slaughter is anticipated in the coming weeks and supports the USDA’s Q4 forecast for production to run 4.9% over a year ago. This should put downward pressure on the pork markets moving forward. The USDA pork belly cutout is currently up 41% vs. last year, but the downside risk remains elevated heading into the end of the year. African swine fever in China is still a concern.
For the week ending October 20th, chicken production increased 3.4% from the prior week and was 4.3% larger than a year ago. But, the six-week total for chicken output stands at just .8% better than 2017. Weakening margins could temper chicken production in the near term. Yet, the USDA is projecting Q4 2018 output to be 1.9% more than last year. Still, erratic pullet placements into the hatchery flock hints that annual chicken output expansion could be below expectations for this winter. This could be counter seasonal supportive of chicken breast prices in the coming weeks. Last week, the ARA Chicken Breast Index was the lowest for any week since February 2006. Chicken wing prices are the cheapest for this time of year since 2013.
The shrimp markets continue to track below 2017 levels due in part to solid imports. During August, the U.S. imported 8.1% more shrimp than the previous year. The U.S. Dollar continues to track near decade highs compared to the Japanese Yen which could only encourage shrimp imports in the coming months. This should temper any gains for the holiday season.
Nearby natural gas futures have been above $3.00 over the last four weeks and the last time that occurred was in the spring of 2017. Total U.S. natural gas stocks are currently 16.4% less than last year. Natural gas prices usually rise in November.