Market Updates for February 21, 2020
Dairy | Cheese
The CME saw the bears return this week to being the Block market more in line with the current environment. Speculators are looking to see how much farther down the market will go, but feel the ceiling it hit last week could continue to be a strong resistance.
Block - Down
Barrel - Up
Block - Down
Dairy | Eggs
Retail demand mixed. Supplies of large tight to short. Market firm
Large -No Change
Medium -No Change
Small -No Change
Dairy | Butter
Cream supplies for butter making is readably available at low prices despite the jump in last weeks’ spot pricing; butter production is ongoing, helping to clear large volumes of cream. In general, the butter market is in a bearish state as the current supply outpaces immediate needs from buyers. Bulk butter inventories are steadily increasing as most butter processors prepare for the upcoming baking season needs.
Grocery & Bakery | Wheat
Spring wheat (pizza flour) prices are 5-10% below last year as North American remain fully adequate. Smaller supplies have pushed pasta flour prices 15-20% above last year.
Grocery & Bakery | Soybean Oil
Soybean oil prices dropped almost 15% in January on expectations for bigger world supplies; prices have since stabilized and are trading in a range similar to Q4 of 2019.
Grocery & Bakery | Sugar
Beet and cane sugar prices remain firm as processors have little uncommitted sugar to offer. The USDA is reallocating tariff rate quota to countries willing to export to the U.S. in an effort to increase supply.
Meat | Beef
Mild weather has accelerated gain rates in feedlots forcing early marketings as cattle reach target weights earlier. Beef prices are under pressure as 5% more beef hit the market in the previous 30 days. The number of market-ready cattle has been reduced which should slow production in upcoming weeks.
Ground beef prices are in the middle of their historical range for this time of year. Cow kills have been running heavy and imported beef prices are falling keeping downward pressure on ground beef costs.
Choice rib prices hit the lowest levels seen in the last 18 months as packers struggled to place extra production. With current prices 15% below last year retailers are forward-booking more ribs for Easter features.
Brisket prices continue to slide as we approach St Patrick's Day; extra supply is more than corned beef demand can absorb.
Inside round features have been supportive so far; prices for other round cuts are slipping.
Strip prices have flattened out as big production temporarily swamps out seasonally improving demand.
Much like ribs, tenderloin prices hit an 18 month lows. Prices will likely find their seasonal low in the next few weeks.
Beef slaughter has picked up, which is boosting supplies of thin meats. The usual seasonal price uptrend has stalled.
Meat | Pork
With China's imports on hold as they restart their economy extra U.S. production has been forced into domestic channels. Meanwhile mild weather is accelerating weight gains forcing larger-than-expected hog marketings. This slug of output hitting domestic markets pushed prices 25% below mid-November highs. Crunched packer margins should slow processing and allow pork prices to gradually recover.
Butt prices are nosediving towards new 5-year lows much like last year at this time. Chinese consumers continue to eat so when export flows resume butt prices should rebound.
Bone-in ham prices got cheap enough to attract buying interest from Mexico; prices are rebounding. Boneless ham prices are tied more to domestic demand but they are also starting to bottom out.
Belly prices continue falling and, with limited freezer space available, it might take additional discounts to attract buying.
Spare and back rib prices are showing some signs of price weakness, but no big downward adjustments have occurred so far.
Bone-in loins have adjusted lower and are trying to find a bottom; boneless loins are at 5-year lows.
Poultry | Chicken
New capacity has added 13% more jumbo chicken output year-to-date; medium chicken production is down so far this year. Small chicken production is up 7% this year due to the new Costco plant. Grade A whole chicken prices are off 10% as ex-Costco suppliers look for new outlets.
With production of jumbo breast meat at record levels, prices seem to be bottoming. Medium and small-sized breast meat are steady. Tender prices are at the low end of where they usually trade this time of year but seem to be edging higher.
Jumbo wing prices are drifting lower we wait for basketball's March madness demand to kick in. Medium and small wing prices are steady.
Leg quarter and thigh meat prices are down in the lower half of their historical price range. Leg meat prices are trending also lower, but have held up better than thigh meat.
Poultry | Turkey
Whole turkey prices are at firm with premiums for future delivery dates. Bone-in breast prices are mostly steady.
Seafood | Finfish
The supply of the big stocks of wild whitefish are set to remain stable for 2020, lifting by less than 1% according to the forecast from the Ground fish Forum in October 2019. For Pacific cod the forum forecast has the total supply at 365,000 t in 2020 down from 387,000t. For now costs are stable with good supply for the 2020 Lenten season. Note the Gulf of Alaska is completely closed in Federal waters for this season but the Bering Sea and the Aleutian Islands are still active fisheries . Overall this has driven a decline in Canadian and US landings from 185,000t to 158,000t as well
The 1x frozen Atl. cod loins from Canada are now available with plenty of supply. Costs remain elevated over last year but are still a good value compared to other Countries of Origin for both quality and cost This could change come spring 2020 if new science indicates a change in the stock assessment as the formal quota announcement will be end of March 2020. In June ICES (Exploration of the Sea) advised the cod quota in the Barents Sea for 2020 to be set at a level 2% higher than it's advised level for 2019 of 674,678 t. At 689,672 t, in 2020 advise comes in at 5% lower than the total allowable catch for 2019 set by the Norwegians and Russians of 725,000 t. In general the total supply of A cod is forecast to rise slightly from 1.131 m tons in 2019 to 1.132 m t . For Now Limson has supply on all sizes of Russian fillets for Lent .
Pricing will remain firm into the Spring and could soften as we head into late Spring / Summer depending on how productions goes after Chinese New Year and Lent . We have seen an increase in Cod sales but Inventory levels remain healthy
2X Frozen Cod remains firm in cost with adequate supply.
The overall Pollock supply for 2020 is expected to remain relatively stable . Note Lenten needs have already been secured for 2020 out of Alaska The forecast at the ground fish forum for the US supply of Alaskan pollock for 2020 is 1.528 million metric tons, down from 1.552 m t in 2019. Note fillet prices for larger sizes are expected to increase as supply on these sizes is more limited.
All of the Lenten needs have been secured and will remain strong through the holiday into early Summer. Pricing is expected to be steady through Spring. Wild Pollock will increase in demand as a high-protein variant. The anticipated increase in demand has many suppliers looking to become vertically integrated to reduce costs, and gain more control over the supply chain.
The tariff for haddock was rescinded in Dec as petitioned by several members of the National Fisheries Institute. In the fall there was a lack of product being imported in case the tariff was to be increased resulting in a shortage now on raw material in Asia, as we progress through Chinese New Year . As a result there is a severe lack of supply for processing once production resumes in China. Supply will not increase more for Lent and this lack of inventory is expected at least through April / May until raw material can be exported to China , processed and returned to the states. For now expect prices to be firm. For haddock out of Norway and Russia the TAC ( Total Allowable Catch) for 2020 is up 25% from 2019.
Yellow Lake perch on all sizes remains under pressure at this time with limited to no supply. Most sizes are hand to mouth and will be allocated out based on inventory. The fall fishery did not produce the fish as was hoped for, so to date we are struggling to get small amounts of fish for sale. This will continue through the spring and possibly into next year’s season as well. Walleye costs saw some softening at the end of 2019 but a few items have started to increase on cost as of late. Supply is plentiful at this time on the prime sizes while the 2/4 and 14 ups (outliers) have been harder to come buy with firming costs. The fall Whitefish season did not materialize as expected either. High winds and poor weather overall hampered fishermen's efforts and supply came up short. Even with these stressors Limson has supply until new season in June. Dressed smelt is short as the domestic raw material product was extremely limited on supply , so much so there is a shortage of the battered as well. Limson is working on securing more product but the resource is limited and costs are firm. This fish in general is under stress and some are not sure if this will be a viable offering in the future. The Canadian blue gill continues to be a struggle as catches and supply have come up short. What is being offered is minimal but firm on cost . The next best option is the same species but produced out of China.
The European supply on zander ,pike perch and euro perch is primed for Lent . Limson is covered on all sizes for this time frame. Costs are expected to remain stable as well. This is a lower cost option to the domestic product and eats comparatively
Mahi Mahi has been secured from the 2019 fall season and Limson has supply for Lent on all sizes. South America yielded mostly smaller fish initially in the 4 oz range at a value in comparison to the larger 6 and 8 oz portions Prices overall have moderated closer to 2013 levels and are now a better value option for Lenten menus. Larger fish were harder to secure and 8 oz are starting to demand a premium compared to other sizes.
Vietnam - Peak season is going on in Vietnam now. Most boats set out after the Tet Holiday/ Chinese New Year, we expect prices to remain stable but we will not have any indication until they come back and the landings are in. There is a current shortage in the market of loins and by-products but Limson has supply on all sizes. Indonesia - There are regular Tuna landings now throughout all of Indonesia. There is still a glut in the market on Saku Tuna Blocks which affects production on other product forms overseas. We are not sourcing Tuna outside of Indonesia and Vietnam as we find they have the best quality with the highest food safety standards. Swordfish is a bycatch of Tuna in Asia, peak season is in Vietnam now and there should be more availability soon. To date there are no offers on Swordfish from Ecuador yet due to Mahi season being in full effect.
By the end of 2018, inventory levels were high and costs were as well with the impending USDA catfish program. This change was handled well by the USDA overall and the big producers in Asia were deemed equivalent with few setbacks and no stoppages of supply. As a result the market went into a tail spin with excess inventory and falling prices. For the bulk of 2019 costs have been soft as many are still working to clear up older inventory. There will need to be a price correction soon as the farmers also need mins. to operate and at current market levels that is an issue. For the US, demand has fallen off but has picked up significantly from Vietnam into China. Note; The US is expected to see 40% less imports of swai YOY.
Tilapia, once a big mover for the foodservice sector has seen diminished sales over the last year where imports have decreased. This commodity was included in the tariff war but many think Tilapia in general has gotten some bad press over the last few years based on the public perception. Some experts at the Global Seafood Conference cite a potential turnaround not only how the fish is perceived but due to the recent signing of "Phase One" of the treaty to resolve the trade war, we may see demand for tilapia turnaround. As such, global production of tilapia is estimated to increase from 6.5 million MT in 2019 to 6.8 million MT this year. The increase in supply should continue to keep prices flat and put this item back on the menu of many foodservice establishments.
Seafood | Shrimp
Pond stocking in India / Indonesia during the main farming season of May–Aug has been much lower this year, suggesting a continuation of supply shortage for the rest of the year. Heavy rainfall in July affected aquaculture belts. Indian industry sources indicate a 30–40 percent production drop in 2019 compared with 2018.
The seafood industry reports stable pricing on Tigers, however demand has been moving over to White shrimp, Winter harvest for Tigers out of Indonesia is finishing up and seeing good supply on larger shrimp while the smaller sizes are tighter causing delayed shipments and an increase in pricing.
Production / harvesting started up in November and is now coming to an end for the Winter harvest. Inventory levels overall remain strong while pricing has firmed some as the Winter harvest did not produce to expectations on all sizes.
Prices have firmed due to limited supply.
The current catch is coming up short on the large-size shrimp which is putting a lot of pressure on availability and price.
Smaller PUDs are becoming tight and driving up prices, as they have been pushed into the Gulf of Mexico with the influx of water coming out of the Mississippi River.
Inventory and pricing are stable.
Seafood | Lobster
To date poor weather and a late summer with cooler temperatures have resulted in very poor landings out of Maine and this issue persists where tails are reported to be down as much as 20-30%. Nova Scotia offered minimal relief as well and due to lack of supply on tails costs have risen sharply in a short period of time. Meat is also very short with limited offerings overall for CK, CK broken, CKL and leg body meat . Since the bulk of meat products are produced in the spring Canadian season, inventory is expected to be tight through the spring as well
The WW tail market continues to be firm. Costs have been increasing since the hurricane in the Bahamas but have now leveled off. With elevated costs on N Atlantic's the WW tails although high on cost, are still a better value in comparison. We expect to be able to meet all of the WW tails needs from other countries but the unknown is at what price level this might be.
Seafood | Crab
The market out of Canada for snow crab has been firm since the end of August on all sizes. For most of the season, larger snow crab, in particular, was seeing thinning supplies, but market participants report that all sizes are moving quickly and supplies are growing tighter with limited offerings. Alaska announced a 24 percent quota increase last fall for snow crab, however, product will not reach the lower 48 until sometime in late Feb early March where the 5/8 size is expected to be the prominent offering. If Quebec is allowed to start fishing in March there is a possibility we could have dual fishing at that time out of Canada and Alaska and there was some hope that this might drive the cost of product down. This remains to be seen. A bigger issue that could present itself this season is the presence of right whales in the gulf. Quebec is hoping they can get a jump on their region and catch a good portion of their quota prior to any right whales being sighted. Overall, supply is very tight and supplies on all sizes are limited with elevated costs.
Both Russian red and golden king crab is seeing upward pricing pressure on all sizes, in particular on reds on the larger count sizes. This pricing pressure is coming about even with imports out of Russia, specifically on red and blue king crab, which are higher year-to-date (YTD). Red king crab out of Russia is up 13.5 percent through August and Blue king crab (which is typically sold in the U.S. as a red king crab equivalent) is up 144.6 percent out of Russia. Imports of golden king crab out of Russia are actually down 12.5 percent. However, Alaska’s Western Aleutian Islands Golden king crab fishery has a quota of almost 2.6 million pounds, with roughly 1.6 million pounds harvested so far, the need and demand for king crab in the U.S. had some assistance.In general costs are firm and supply has been guarded.
A new 10% tariff on all seafood items should go into effect in August. The market is still uncertain however, between high market prices, and limited supply, cost might go up. This coupled with the void in the market on red swimming crab only strengthens this possibility. We are still expected to start receiving shipments on red crab in October. The main crab harvest is October – December.
Prices are still high with great inventory. There has been a slight decrease in pricing from Indonesia while Philippines and India move up to be more in line with Indo. For the next 60-90 days prices will stay level to a possible dip however, Q4 is expected to pick back up. With the red swimming still high with limited supply, this too drives the price up. Overall prices will come down a bit.
Seafood | Scallops
Scallop costs started to uptick at the end of the year. Costs typically increase month over month until the season resumes come spring. Preliminary review of the 2020/2021 scallop biomass shows good juvenile population with total quota amounts expected to be similar to this years expected 60m pound range. Note that larger sizes this season are expected to be shorter compared to the more prominent 20-30 ct sizes
Ocean Perch raw material was coming up short delaying shipments and firming up costs.
Seafood | Salmon
Demand is outpacing supply on the global market for Salmon but we are covered through Lent on both Chilean and Norwegian. Salmon has seen growth of 5% every year for the last three years. This increasing demand might start to hit a ceiling in 2025 where there could be a gap in overall production leading to increased costs of goods ultimately resulting in a volume drop . The hopes for land based aquaculture to aid in supply are expected to be limited at best until 2030 so to date the US is import dependent where the bulk of salmon sold in retail and FS is the farmed Atlantic variety. The holiday season and adverse weather out of Norway have impacted current supply but costs are expected to level out as harvest begins to pick up the next few weeks. Note cost is also dependent on the current exchange. For Chile the political unrest has diminished some but Chile needs to continue to support the social changes coming their way. What we need to focus on is the health benefits of eating all kinds of salmon that is high in Omega 3’s and B vitamins.
There will be good volume this year on Chilean salmon, however, there is concern due to sea lice which was already at record levels when heading into the summer season. Stronger government regulations are being implemented and will lead to higher production cost. Also, with the focus on new farming areas there are higher logistical costs.