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Lettuce prices have fallen sharply in recent weeks as the harvest and supplies improve. Iceberg shipments last week were essentially flat with the prior week and were 2% more than the same week last year. Temperatures in the chief U.S. harvest region are forecasted to cool during the next week which could slow the harvest. Thus, the downside price risk in the iceberg lettuce market from here is only expected to be modest in the near term. Cold weather is lingering in the Florida tomato fields, but history suggests that lower prices should be pending.
Soybean oil and palm oil prices rose to a seven month high this week. Solid demand is partly behind the increase, but world economic concerns are building, and U.S. soybean supplies are burdensome. This is likely to limit any further upside potential for the soybean oil and palm oil markets in the near term.
The cheese markets have risen over the last week. Value purchases occurred after cheese barrel prices hit the lowest level since 2009 earlier this month. CME Class IV milk futures for 2019 are averaging 6.4% higher than the equivalent Class III milk futures which encourages milk to go to milk powder and butter production. This factor should support cheese prices in the coming months. Spot butter prices this week hit a nine-week high. Demand is good but prices usually decline modestly in early February.
Beef output eased last week and was down 1.6% from the previous week but was up 3.4% year-over-year. The Choice boxed beef cutout continues to outperform expectations, up near 5%, year-over-year, with the middle meats the main driver of those gains. Choice 112A heavy ribeyes are up near 12% year over year, with tenderloins up 15%. While beef prices are expected to seasonally rise heading into the spring, already costly late-winter pricing should temper those gains. Beef 50% trimmings have been pricing mostly flat in the mid-$0.50s, but down 35% (yoy). This presents good value with higher spring pricing expected.
Last week, pork production held steady, week-to-week, but was up near 6% year-over-year. The USDA pork cutout value continues to lag due in part to the larger production schedules, but the lean hog futures market is pricing in a great deal of optimism from Q2 onward. Continued ASF struggles in China are likely the root of the buoyed hog futures market, but the upside from here appears a bit rich, at this point. Pork belly prices saw a sharp correction lower as of late and appear to have put in a seasonal top. Prices may be on the defensive into early Q2.
For the week ending January 19th, chicken production was up 12% year-over-year, with increases noted across all classes of birds. Despite the staunch increases in output, the six-week rolling average was up only marginally. The larger broiler production was likely in advance of the hazardous winter weather, which may stall the recent price appreciation experienced for chicken over the past several weeks. Wing prices should be near a seasonal peak ahead of this weekend’s Super Bowl, plus March Madness forward buying is likely culminating as well. Tenders remain the star performer of the bird, with prices up 3% year-over-year and the highest since early August.
The shrimp markets traded well below the previous year levels during the fall. This is due in part to a high value of the U.S. dollar encouraging shrimp exports to the U.S. Concerns are building that the world economy, particularly in Asia, is slowing. If so, this could push more shrimp to the U.S. in the coming months which could weigh heavy on prices.
Natural gas futures have fallen sharply over the last few weeks despite the arctic air breakout in the upper Midwest. Weather forecasts have turned warmer which will lessen natural gas home and commercial heating needs. History hints that lower natural gas prices are still possible in the coming weeks.