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The avocado markets remain historically elevated. The California harvest is in full swing, but volumes so far have been disappointing. Add to this that imports from Mexico are seasonally declining which suggests that avocado prices could remain supported this summer. Plus, history hints that the seasonal risk in avocado prices during this time of year is to the upside. The tomato markets remain fairly attractive, but concerns are building that higher prices will materialize later this year due to the recently implemented U.S. tariffs.
Planting problems continue in the U.S. with progress for both corn and soybeans some of the smallest in the last several decades. History suggests that soybean supplies could be fine but that corn supplies are likely to tighten. This could underpin the grain markets for the next several weeks unless the weather greatly improves.
Spot butter prices recently priced at the highest level in a year. April 30th domestic butter stocks were down 5.4% from the prior year, and it was the smallest inventory build for the month since 2014. Butter demand is solid. History says that butter prices can still rise through early July. The cheese barrel market has fallen since last week. U.S. cheese inventories on April 30th were up 4% from 2018 and were a record. But cheese stocks grew in April at the smallest rate for the month in nine years. Since 2014, the average move for cheese block prices in the last two weeks of June was down 4%.
Beef production fell sharply heading into the long holiday weekend, 3% below the week prior and 1% less than last year. Spot sales have been on the rise, with out-front sales escalating as well. Beef prices are expected to see a modest bump higher moving into the late spring, with the middle meats driving those gains. But prices should still be attractive with ribeyes running 8-10% below a year ago while strips and short loins are expected to hold wider price discounts than last year as well. The grinds remain elevated relative to last year, but lower prices are anticipated heading into the summer before rebounding into Labor Day.
Last week, pork production fell 2% from the previous week but was closer to 3% better than last year. Pork production schedules are expected to continue to fade during the summer which should provide support to the USDA pork cutout value. The pork belly markets are well off their mid-April highs and have been mostly sideways during the past four weeks. Seasonally, bellies usually see a 51% price increase from late-May into late-July or early-August which suggests that prices could eventually approach the $1.80’s.
For the week ending May 18th, chicken slaughter was up from the prior week and was stronger than a year ago, but lighter bird weights depressed ready-to-cook (RTC) chicken output. Still, the six-week average of RTC production is up 0.5% (yoy). The wholesale chicken index (USDA) has turned lower heading into this late spring, with sliding breast and wing prices leading the way. Chicken leg quarter prices remain firm and the highest for late-May since 2014. Chicken wing prices have declined and are now running in the lower $1.80’s but rising production schedules, coupled with easing demand, are expected to take prices even lower into the summer.
The shrimp markets continue to track below a year ago and are at historically low levels. Despite this, U.S. shrimp imports were solid in April. During the month, the U.S. brought in 6.1% more shrimp than 2018. With the elevated U.S. dollar, good shrimp imports are anticipated to persist for 2019. However, the downside risk in shrimp prices from here is likely nominal.
Nearby diesel fuel (ultra-low) futures declined 3.9% over the last week. The EIA’s most recent weekly national average retail diesel price was $2.909 per gallon which was 4.3% cheaper than a year ago. Diesel fuel prices typically find support during June but usually peak for the year during July.