Fruits and Veggie
Tomato – Supply is slow to ramp up out of Alabama, eastern Tennessee and North Carolina keeping markets firm this week and demand is very good. Unfortunately, we continue to experience rain delays and overall production is down. Round Tomatoes are up about $2 / 25 LB. Cherry is beginning to look much better dropping about $2 / 12 Pint. Grape is steady to slightly lower this week with improvement on the horizon. Romas are flat on the week.
Onion – California prices are steady week over week. New Mexico prices are up slightly. The Food Box program is putting a strain on smaller sizes. Jumbos look to be in a good position going into new harvest in 3 weeks or so.
Potatoes -- Further Increases on potatoes this week. Fryers have been competing with foodservice packers and USDA Food Box on available fresh potatoes. Prices took a shocking $1.50 jump over the week but finished flat on Friday.
Lettuce – The Iceberg rally late last week continued. FOB’s on 24 counts were up $2.25 per case on average, with the expectation that another $3 increase will come over next week. Romaine also remained escalated and took $4 increases on all sizes with more upward movement expected next week. Less than sufficient supply seems to be the culprit for these increases and the expectation is for escalation for 3 weeks.
Cucumbers – Cucumber demand is good out of Michigan and North Carolina; Georgia is done. Markets are higher this week. In the west, good supply crossing through Otay Mesa and South Texas.
Oranges –The valencia market is hot and inventory is down. Foodservice availability is limited. USDA farm to family program is also taking majority of the valencias and the business towards covering other orders. Spot loads are available but at pricing at a premium.
Lemons – California lemons are extremely short, inventories are way down, although we are seeing improvement on pricing and demand. Quality has been great and the fruit is nice.
Exceptional international resin demand has been a driving force to the current upcycle, though fresh PE export transactions also slowed this week as the vast majority of July business had already been booked. However, there is plenty of demand waiting on deck for fresh August offers. Widespec PP continued to be sent offshore, while strong domestic prices have limited Prime export availability. Price increases are implementing for July resin contracts. Polyethylene will secure its $.05/lb hike, bringing the 2-month tally to $.09/lb, with yet another nickel on the table for August. Polypropylene producers will pass through a large cost-push price increase which could now exceed the $.065/lb estimate and still leave room for a similar sized increase already imminently eyed for August. The Hurricane season is heating up along with the waters in the gulf, forecasters predict a particularly active season, so please be mindful of your resin supplies and plan accordingly.
Undertone is Weak. Excess supply turned what was expected to be an increase into a decrease. Should remain weak through next week.
NOPA crush report showed 167.2 million bushels of soybean were crushed. This reading was above the trade’s range of estimates and compares to 169.6 last month and 148.8 last year. Soy oil stocks were 1.778 billion lbs, below the average trade estimate of 1.813 and last month’s 1.880, but above last year’s 1.536. The oil yield was 11.56 lbs./bu. The lower soy oil stocks despite the higher crush is a bit concerning and certainly not bearish. Strength on the oil front seems to be coming from the supply side. Palm production in question with a lack of fertilizer being noted. Brazil crush margins are squeezed due to a tightness in the soybean market driven by large export sales. Argentine farmers remain reluctant sellers. Weather concern exist in China with flooding and the Black Sea region with dryness. A quick note sustainable bull markets are demand driven.
CME spot Cheddar blocks continued to tumble. They have lost ground every day since they topped out at $3 less than two weeks ago. USDA reported June 30 cheese stocks at 1.42 billion, 2.6% higher than last year. Cheese stocks are adequate for demand, but is cold storage now filled with expensive inventory? Since milk has been relatively plentiful and selling under Class for a handful of weeks now, we can assume that the price of the inventory is artificially inflated due to intense demand in June and early July. Furthermore, we see this week a common occurrence of the last 12 months, the convergence of block and barrel pricing, which is typically viewed in positive light for market tones. However, in the recent past when this trend initiates itself, its usually is not a straight shot to lower prices.
Bone in Chicken prices dropped again this week. WOGS are very competitively priced with lighter birds dropping $.09/LB and heavier birds dropping $.06/LB. Inventory remains low on jumbo birds but Jumbo BLSL breasts are selling at discount. Many would contend that the 52 week high price of $1.58 LB in June for Jumbo BLSL breast was so far out of line that were still experiencing correction to a more market driven price. Export sales are low on bone in dark meats and excess inventory, specifically on those cuts, is building with a continual decline in foodservice need. Tenders and wings remain firm with good support from all sectors. Chick placements are still below 2019 levels when pricing was significantly higher than today. However, inventories are heavy, and processors are beginning to reduce operations and production to throw some support under prices.
Chinese US relations deteriorated this week as both countries attempt to close embassies. Many analysts do believe that China wants to fulfill its Phase 1 commitments, that can be seen in corn, bean and pork purchases by that country. We would like to see China come in and be a customer for US Beef, which is still a possibility given the strain between China and Australia, the #1 exporter of beef to China. Weakend relations between China and Australia began when China banned the import of beef products from 4 major packers due to breach of labeling laws. Since then the two countries have worked to overcome these challenges but concern and caution surrounding these imports still exist. The US is in a good position to export to China. Cold storage levels did improve in June over May. The April to May drawdown was listed as the largest on record since 2014. Were not sitting about 6% higher than this month last year and 3% higher than last month. All positive numbers, largely thanks to Saturday slaughter, however we are still behind growth expectations for 2020 after a record 17.7% drop in cold storage from April to May.
In the cutouts, Select available remains limited as grading continues to move to Choice or Prime. Ribeyes look to be hitting their market bottom this past week. Overpriced Choice strips took a $.53 drop and are now more competitive against Select cuts but still should have some downward potential before early August support from retail purchasers. Both Choice and Select clods are firming after sinking to multi year lows the previous week. Specifically, further processed buyers are taking advantage of low prices to build cold storage inventory after depleting socks during the shutdown. We would expect prices to firm to near their 2019 averages for the fall months when chuck cuts become more popular. However, the cattle backlog is becoming a driving force for lower chuck and grind pricing. Top Butts are increasing presumably due to sustained retail and foodservice support for this affordable and grillable cut. Many steak cut purchases have moved away form expensive ribeyes and strips to loin cuts in an effort to capture margins that were lost due to high beef prices earlier in the year. There are very few sales beyond 3 weeks reported which might indicate that large buyers are waiting for further price reduction after the Labor Day push.
Cold Storage stocks of pork declined in June with bellies and ribs taking the greatest hits of 8% and 1% respectively. Overall pork in cold storage was down 1%. This drawdown is largely attributed to both consistent domestic consumption and exports. Ribs are still rated as adequate supply for current need. We’ve seen some slow decline of late, we expect that to reverse in August where more fresh ribs sell initiating a slow incline into September. Trim moved higher, though a little quicker than expected. Boning plants labor remains limited and therefore production capacity is short. Were entering a gap of low trim demand before the holiday season. We could see one more week of gains before price drop.