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The U.S. has held the Tomato Suspension Agreement with Mexico since 1996 but has laid the groundwork to withdraw as of May 7th unless it can be renegotiated before then. Obviously, time is starting to run out for the renegotiation which could open the door for the U.S. to pursue anti-dumping charges against Mexican tomato farmers. Potentially this could cause periods of supply disruption which would be supportive of the tomato markets. The avocado markets remain elevated as the Mexican harvest slows for Easter.
Wet conditions are limiting the early corn planting season in the U.S. As of April 14th, just 3% of the crop was in the ground which is modestly behind the five year average for the date. Although planting delays aren’t necessarily bad news for acreage or crop yields, they could underpin corn prices in the near term.
The CME cheese markets have been range-bound in recent weeks. U.S. milk output is seasonally increasing and should peak sometime next month. But that may not necessarily translate to lower cheese prices. The international cheese markets have been on the rise due to shortened production. And history shows that the CME cheese block market has averaged higher in May from April in three of the last four years. The CME butter market has been fairly steady as of late as well. World butter prices are trending upward which could pressure the U.S. market in the coming weeks.
Last week, cattle harvests jumped sharply, coming in at 638,000 head, the largest of the year thus far, and the second 630+ head harvest of 2019. Packers appear to be putting the pedal to the metal on production heading into late April, but boxed-beef sales volumes have been interestingly light. Across the past four weeks, total beef sales volumes are running 7.8% below year ago and 3% below the three-year average. But beef prices remain elevated. Expect prices to continue higher into May/June, with Choice middle meats leading the charge higher and trim and grind prices increasing as well.
As pork packer margins ease, packers have pulled back on production. Recent winter storms have helped validate some of the reason for slowing production. Last week, pork production was down 3% from the week prior and just 0.5% over last year. The cutout remains well supported, up 27% from last year. Belly prices, in the mid-$1.60s, are up more than 80%. Changing international meat flows are altering availabilities and are expected to keep excess product off the domestic market during the next several months.
For the week ending April 6th, total chicken production was up 3.5% from last year, but on a six-week rolling average basis, production is up just 1.9%. The largest gains have been noted on the 7.76lb and up category, running 10.2 percent over last year. Heading into late spring, recent chick placement data indicates modest growth, at best. The wing index remains choppy in the mid-$1.90s, a record high for April, but is expected to ease moving forward. Breast meat continues to struggle to gain much traction and may be in the process of putting in an early seasonal top. Solid exports could support the leg quarter markets throughout the spring.
The shrimp markets continue to track below 2018 levels. This is despite shrimp imports during January that were well below, 11.7%, the previous year. The high value of the U.S. dollar and the perceived slowing of the world economy are expected to fuel solid U.S. shrimp imports during the next several months. This could temper the upside in the shrimp markets.
U.S. diesel fuel prices continue to rise. For the week ending April 15th, the average on-highway diesel fuel price in the U.S. was up for the third consecutive week to a four month high. Typically, the diesel markets continue to firm in the coming weeks before forming a seasonal top in late May.