COMMODITIES

Commodity Insights

Competitive Commodity Insights: What will be on the grill for summer?

What's on the grill for summer?

Now that Memorial Day has officially kicked off the start of summer grilling season, what price trends will dictate which meats consumers choose? Here's the latest figures.

Beef

USDA reports the relentlessly upward trajectory in wholesale beef prices had begun to at least slow down, as the market transitioned into the spring quarter. The choice cutout declined a little over $3 per hundred pounds, topping $2.59 per pound in late April. USDA believes domestic demand has weakened modestly in the near term, although it remains strong by historical standards. For the week ending May 8, the choice cutout valuewas still 24 percent higher than its 3-year average.

Beef price trends

Pork

USDA adjusted its second-quarter commercial hog crop predictions by 100 million pounds over previous estimates--nearly 6 percent higher than a year ago when experts feared the new disease Porcine Epidemic Diarrhea was going to cut heavily into pig supplies. As a result of that unexpected increase in supplies, the price of live hogs are expected to average 42 percent below the same period last year. High beef prices combined with ample pork supplies makes it a natural feature for grilling season, USDA anticipates. The agency expects about 1 percent more pork production in 2016, for an average per-pound retail price of $3.70--17 cents lower than the expected 2015 average.

Pork price trends

Chicken

A current pattern of moderate increases in the number of broilers slaughtered and higher liveweights is expected to continue throughout most of 2015, according to USDA. The supply increases are expected to push forecast broiler meat production in 2015 to 40.2 billion pounds, about 4 percent higher than in 2014. The national wholesale price for whole birds averaged $1.05 per pound in April, up from the first-quarter average of $0.97 per pound but still down 4.8 percent compared with a year earlier. In the parts market, dark meat prices continued to decline due to lower exports. The April average price for leg quarters in the northeastern market totaled $0.33, the lowest monthly price since 2009. Breast meat prices in the northeastern market averaged $1.53 per pound in April, a 13-cent increase from March but still 10.6 percent lower than in April 2014.

Poultry price trends

Lamb

With its first inventory increase in nearly a decade reported at the beginning of this yar, the U.S. sheep industry is expected to experience tighter supplies as farmers hold back animals from market to use as breeding stock. Even with a larger lamb crop in 2014, USDA expects little change in market supply for this year, with a total forecast production of 152 million pounds. Live animal prices and resulting wholesale markets are expected to remain strong in 2015, averaging $1.53 to $1.62 per pound. Continued tight supplies will likely maintain those prices.

Lamb price trends

Turkey

Despite reductions by USDA in its turkey production estimates for the second and third quarters of this year based on some 6 million birds lost to an outbreak of avian flu, continued strong production growth in the first three months of this year, along with continued signs of expansion in turkey eggs set for hatching and the number of young birds placed for growout leads the agency to expect total 2015 production to top last year by nearly 4 percent. Wholesale prices were reflecting the supply expectations, with prices for whole hen turkeys averaging $1.04 per pound in April, just 0.5 percent above the previous year. Prices for whole birds and turkey parts are expected to experience some downward pressure for the remainder of 2015. Prices for whole frozen hens are forecast below year-earlier levels throughout 2015. The average national price for frozen whole hens in second-quarter 2015 is forecast at $1.03-$1.07 per pound, about 5 cents below a year earlier, with the yearly price forecast at $1.04-$1.08 per pound, likely to be down from 2014’s $1.08 per pound.

Turkey price trends

Competitive Commodity Information: Will avian influenza give poultry prices a cold?

Avian influenza threatening poultry prices?

A highly contagious strain of avian influenza found so far in at least 60 commercial poultry flocks, according to USDA reports, has some market watchers spooked. Most of the affected flocks are turkey operations in the midwest, and the state of Minnesota, the nation’s top turkey producer, has suffered worst, losing an estimated 2.6 million birds, and prompting the state's governor to declare a state of emergency. At risk is the approximately $4.8 billion value of some 200 million turkeys this country grows annually. But with detection of the virus in wild birds along the Mississippi and Pacific Flyways indicating the virus is active in migratory bird populations, the deeper fear is the virus could approach the chicken-producing centers of the eastern U.S.

Several European and Asian have placed some restrictions on imports of U.S. poultry as a result of the outbreak. As of its mid-April report, USDA was reporting 2015 turkey exports would fall 10.5 percent, to 720 million pounds, due to trade restrictions in China and Korea, the strength of the dollar against most currencies, and restrictions on U.S. exports due to the outbreaks. U.S. turkey meat production in first quarter 2015 is now estimated at 1.4 billion pounds, 25 million pounds less than the previous estimate but 7 percent higher than a year earlier. Turkey cold storage holdings at the end of February were 323 million pounds, an increase of 4 percent from a year earlier.

Meanwhile, although broiler meat production in January was 5 percent higher than the previous year, production in February was down 1 percent to 3 billion pounds; however, the estimate for first-quarter 2015 remained at 9.7 billion pounds, an increase of 5 percent from a year earlier. Current data point toward a strong increase in broiler meat production in March based on one additional slaughter day, leading to a higher number of birds slaughtered, in addition to continued increases in average liveweights. In February the number of birds slaughtered fell by 2 percent, but that decline was partially offset by a 1-percent increase in average liveweights at slaughter. This pattern of moderate growth in the number of birds slaughtered and higher liveweights is expected to continue throughout most of 2015. The increases are expected to push forecast broiler meat production in 2015 to 40 billion pounds, 4 percent higher than in 2014.

Although this outbreak of avian influenza, the worst in years, does pose significant risk to the industry and can be devastating to individual flocks, it's prudent to remember the world's strongest surveillance program for the disease. Federal and state animal health agencies along with industry has responded to try to contain and control the outbreak through several measures:

* Restricting movement of poultry and poultry-moving equipment into and out of specific quarantine areas

* Euthanizing affected flocks to prevent spread

* Testing wild and domestic birds in a broad area around the quarantine area

* Disinfecting affected flock locations to kill remaining virus

* Retesting to confirm affected farms remain virus-free. USDA also is working with its partners to actively look and test for the disease in commercial poultry operations, live bird markets and in migratory wild bird populations.

Farmer Goes to Market will keep you updated on important developments. Use the comment section to leave us your questions.

Competitive Commodity Information: Where are beef prices going now?

Where will beef prices head now?

Encouraged by the return of (some, at least) winter precipitation, America's drought-beaten beef producers now show at least intentions of expanding the supply of cattle. Denver-based market-analytics firm CattleFax predicts the U.S. market for live cattle ready for slaughter hit its top cyclical price in 2014 and in all likelihood is now on its way down the back side of the traditional high/low price cycle.

However, that road back to wholesale price relief for grocers is a long and bumpy one, and will not come soon.

Rain makes grass, and grass makes beef, the old saying goes, meaning cattle ranchers devastated by years of drought are now making plans to start adding more breeding animals. Those obvious intentions, combined with a milder winter that should help farmers achieve those plans, coupled with a strengthening dollar and labor slowdown at West Coast shipping ports that could both tamper beef exports are all working together to push down the cost of live cattle on expectations of rising future supply.

But how quickly that translates to lower wholesale and retail prices is not black-and-white. The undertone in the wholesale beef market currently remains "soft," in USDA's words. But don't confuse that softness with poor demand, the agency's analyst cautions. Historically, total meat consumption tends to languish during the winter quarter, followed by burst of increased consumption as grilling season arrives. So for the first quarter of 2015, at least, buyers at the wholesale level remain reluctant to significantly increase beef purchases.

Retail beef prices rose to record highs in January, with January 2015 Choice retail beef at $6.33 per pound—up almost a dollar from this time last year—and all-fresh retail beef at $6 per pound, up over a dollar from January 2014. Still, at least for the near-term, packers continue to operate in the red. While wholesale beef cutout values did rally noticeably in late February as a result of reduced steer and heifer slaughter, those prices have not risen enough for packers to maintain steady profits, USDA says, although certain components like 90 percent lean beef remain at historical record levels.

USDA predicts beef prices will increase 4.5 percent to 5.5 percent this year--less than half last year's 11 percent to 12 percent increase. Overall retail meat, poultry and fish prices are expected to increase 3 percent to 4 percent.

On the way back to replacing the approximately 3 million breeding cows U.S. ranchers sold off between 2004 and 2010, supply will test the market's patience. All indications say we will have a larger crop of new calves born in the spring months, but that doesn't correlate to a bigger supply of market-ready cattle until 2016.

Competitive Commodity Information: Egg prices feel the impact of California legislation

 

USDA reported that during the final two months of 2014, egg prices in most markets experienced a brief but sharp peak in prices. Wholesale prices for Grade A large eggs in the New York market averaging $1.28 per dozen the final week of October spiked more than 70 percent by the first week of December, rising to $2.19 per dozen.

Competitive Commodity Insights: Longterm meat price-acceptance index

Are gold-plated meat prices discouraging consumers yet?

Despite retail meat category prices in record territory, shoppers appear willing to continue to pay those higher prices, according to the latest update of a willingness-to-pay index from Oklahoma State University.

Partners

Supported by the Nebraska Farm Bureau

The farm and ranch families represented by Nebraska Farm Bureau are proud sponsors of the Farmer Goes to Market program. We take great pride in supporting Nebraska's agricultural foundation. A key part of that effort is to make sure we produce safe and affordable food. This newsletter is an important part of our effort to connect the two most important parts of the food chain -- the farmer and the grocer -- with the goal of increasing consumer awareness and information about how their food is raised in Nebraska.


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The Nebraska Corn Board, on behalf of 23,000 corn farmers in Nebraska, invests in market development, research, promotion and education of corn and value-added products. The board aims to work closely with the farmer-to-consumer food chain, to educate everyone about the role corn has in our everyday healthy lives. The Nebraska Corn Board is proud to sponsor the Farmer Goes to Market program to help bring its mission of expanding demand and value of Nebraska corn to the consumer, through the strongest touch point in that chain: the Nebraska retail grocer.


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The Nebraska Grocery Industry Association was formed in 1903 by a group of Omaha grocery store owners, wholesalers and vendors to allow them to promote independent food merchants and members of the food industry, and to promote education and cooperation among its membership. NGIA continues to represent grocery store owners and operators, along with wholesalers and vendors located throughout Nebraska, by promoting their success through proactive government relations, innovative solutions and quality services. NGIA offers efficient and economical programs. NGIA also lobbies on both a state and national level, ensuring that the voice of the food industry in Nebraska is heard by our representatives.