Competitive Commodity Insights

Search Farmer Goes to Market

Search Site
Sunday November 19, 2017

What's in store for milk supplies?The retail price of whole milk rose in May to an average nationwide price of $3.74 a gallon, according to the Bureau of Labor Statistics, marking a 5.5-year high. Although by July the price had dropped back to $3.65, milk prices on the futures market jumped into record territory early this month, portending even higher retail prices ahead. All this increase has come at a time when dairy farmers are increasing, not decreasing, the supply.

What’s going on with milk prices?

Dairy exports higher than a year ago have been a big factor, driving demand and price even in the face of supply increases, reports University of Wisconsin milk market authority Bob Cropp. World dairy product prices have been higher than U.S. prices, which has served to draw even more milk out of this country. China has been very active in importing dairy products, now surpassing Canada as the United States' second largest customer. Cropp expects this export volume will likely hold at levels that will end the year above the record level of 2013.

But China has accumulated stocks to the point where its import activity has slowed, resulting in a significant fall in world prices to a point now below U.S. prices. While cheese exports were still higher than a year ago for June, reports are that new orders by international buyers have softened. June butter exports have already fallen below a year ago, as have nonfat dry milk exports--now off by 25 percent, Cropp says. So dairy product prices and milk prices can be expected to decline. The question is how soon and by how much?

The level of milk prices and much lower feed costs has meant very favorable margins for dairy producers, and favorable margins typically spur increased production to take advantage. Corn prices are 44 percent lower than a year ago, alfalfa hay prices are just 3.3 percent higher and soybean oil meal prices are starting to fall and are 5 percent lower than a year ago. However, California, the nation's largest producer, with a severe drought is experiencing alfalfa hay prices 35 percent higher than a year ago. So, with some tempering, milk production is picking up, as dairy producers feed for higher production per cow and by adding milk cows. USDA’s milk production report revised June’s milk production to 2.2 percent higher than a year ago and estimated July’s production to be 3.9 percent higher. July milk cows numbered 0.4 percent higher than a year ago, and milk per cow was 3.5 percent higher. Of the 23 dairy-reporting states, 11 had more cows than a year ago, 21 had more milk per cow and 20 had more total milk production.

All told, Cropp says, expect milk production to continue to run 4 percent or more above levels a year ago for the remainder of the year But, it will take time to build stocks. That means prices will only gradually decline rather than take a sharp fall. Dairy futures are reflecting that price optimism.

More young turkeys are coming to market, but how soon?

As summer’s close draws down the seasonal outdoor grilling season and its record-high prices for the season’s staple, beef, grocer’s eyes turn to the holiday meat season. What do turkey supplies and prices hold in store?

USDA forecasts turkey meat production in the second half of 2014 to be up 5 percent from the same period in 2013, at a total 2.95 billion pounds. The supply bump is slighter under expectations: Even with relatively strong farm prices and lower costs for feed—the largest expense in turkey production—the rise in the number of young turkeys farmers placed for growout in anticipation of better profitability didn’t turn significantly higher than a year earlier until May. That jump in placements, delayed though it was, should drive turkey meat production significantly higher in fourth-quarter 2014 and into 2015.

Turkey supply projections

Turkey meat production during the first half of 2014 was 2.76 billion pounds, down 6.2 percent from the same period in 2013. With the number of birds slaughtered and turkey meat production lower in the first half of 2014, turkey stocks at the end of June were down sharply compared with their year-earlier levels. At the end of June, turkey stocks totaled 460 million pounds, down 19 percent from the previous year. Stocks of whole turkeys totaled 266 million pounds, a 14-percent decline from the previous year, while stocks of turkey products totaled 194 million pounds, a decrease of 24 percent from a year earlier. Turkey stocks are expected to remain below year-earlier levels through the end of 2014 but then to expand in 2015 as production increases.

That reduced supply in cold storage holdings have put upward pressure on prices for whole birds. Prices for frozen hens have been higher than the previous year so far in 2014. In July, prices for frozen hens averaged $1.09 per pound, 10 percent higher than the previous year. Whole-hen prices are expected to stay above year-earlier levels through the end of 2014 but then to move slightly lower than the previous year during the first half of 2015.

Over the first 6 months of 2014, prices for almost all parts averaged higher than during the same period in 2013. Prices for leg meat products (drumsticks and thighs) have averaged 41 and 44 percent higher compared with a year earlier. Price changes for breast meat products were mixed, with prices for breast meat down slightly and boneless/skinless breast meat sharply higher. Wholesale breast meat over the first 6 months of 2014 averaged $1.21 per pound, 2 percent lower than a year earlier. On the other hand, prices for boneless/skinless breast meat averaged $2.88 per pound, an increase of 144 percent from a year earlier. Boneless skinless breast meat may be the turkey part that has benefited the most from current very strong beef prices. Drumstick prices averaged 48 percent higher in the first half of 2014 than a year earlier, while prices for thighs were up 63 percent. Wing prices, at $1.22 per pound, were 4 percent higher. With low stock levels and lower production through third quarter 2014, turkey part prices are expected to continue to experience upward pressure.

It's time for summer grilling. Here's a commodity outlook

With summer grilling season under full steam, meat prices remain red hot.

Beef

The average boxed beef cutout, a composite of wholesale prices for Choice, Select, branded and other categories, gained 13 percent between the year's beginning and the end of April. That month, the wholesale prices appear to have topped, with wholesale prices dropping 11 cents per pound.

Beef price trends

Beef to chicken price comparison

Pork

The wholesale prices for beef, pork, and poultry are all driving each other toward higher levels. Wholesale pork remains particularly high in comparison to both beef and broiler prices. The pork cutout rose by 40 percent the first half of 2014, although like beef, they appear to have topped, slipping 14 cents a pound, or about 11 percent, in April.

Pork price trends

Beef to pork price comparisons

Chicken

Unlike beef and pork prices, broiler prices have continued to drive upward. After languishing for most of first quarter 2014 while beef and pork reached new highs, broilers have now caught up, increasing substantially the last two months. By the end of April, the composite broiler price reached $1.11 per pound, a 16 percent increase over the price at the beginning of the year. Poultry is no longer a relative bargain against beef.

Poultry price trends

Pork to poultry price comparison

Will corn crop bust the bins this year?

Drought's effects are slowly disappearing

USDA reports a combination of factors--rain in the southern High Plains finally beginning to relieve the drought that began nearly
four years ago; cool, dry air overspreading the northern Plains; and a lack of heat stress and abundant soil moisture in the Corn Belt of the midwest--are all contributing to corn-growing conditions approaching the best in 20 years. USDA reported by the third week in July, more than half  this year’s corn crop was at or beyond the "silking stage," the critical stage in the plant's development in which corn kernals begin to develop. The 56 percent silking mark was 44 percent higher than the corn crop was at this point in time last year, and just above the average for the last five years.

Overall, USDA reports fully 76 percent of the current corn crop is in good to excellent condition, or 21 percent better than it was at the same time last year. The quality of the crop at this point in the season is nearly unprecedented: In the last two decades, USDA has reported only one other year in which the crop was better by the third week of July. That was 2004, when the crop went on to set a record average harvest of 160.3 bushels of corn per acre.

Futures market prices for corn fell to four-year lows on the news of crop condition that forbodes higher supplies; however, continuing high global demand helped temper the price decline to less than some analysts expected based on anticipated supply increases this fall. About 20 percent of the annual corn crop gets exported to other countries.

How the corn crop is progressing

Why is corn supply and price so important? Corn is the most widely produced feed grain in the United States, with most of the crop providing the main energy ingredient in livestock feed, according to USDA. Corn is also processed into a wide range of food and industrial products, including ethanol. Because corn is the staple commodity for livestock and poultry feeds, which makes up about three-quarters of the total cost of raising meat, milk and eggs, even relatively minor changes in corn price can fuel expansion or contraction plans among livestock producers that eventually result in price changes in meat, milk and eggs.

According to the American Egg Board, consumption is at a seven-year high with Americans adding three eggs per person for each of the last three years, bringing the 2013 per capita total to just over 250 eggs.

Kevin Burkum, senior vice president of marketing for the egg marketing group, sees the increase as being partly about the shift toward protein-based breakfasts as well as the fine dining trend that has turned eggs into the same type of dish-finishing flourish as bacon.

"The fact is ,there is nothing that isn't improved when you put a well-cooked egg on top of it," says Ruhlman.

- See more at: http://www.northjersey.com/food-and-dining-news/recipes/versatile-eggs-are-good-source-of-protein-1.842491?page=all#sthash.E0M8dGHy.dpuf

According to the American Egg Board, consumption is at a seven-year high with Americans adding three eggs per person for each of the last three years, bringing the 2013 per capita total to just over 250 eggs.

Kevin Burkum, senior vice president of marketing for the egg marketing group, sees the increase as being partly about the shift toward protein-based breakfasts as well as the fine dining trend that has turned eggs into the same type of dish-finishing flourish as bacon.

"The fact is ,there is nothing that isn't improved when you put a well-cooked egg on top of it," says Ruhlman.

- See more at: http://www.northjersey.com/food-and-dining-news/recipes/versatile-eggs-are-good-source-of-protein-1.842491?page=all#sthash.E0M8dGHy.dpuf

According to the American Egg Board, consumption is at a seven-year high with Americans adding three eggs per person for each of the last three years, bringing the 2013 per capita total to just over 250 eggs.

Kevin Burkum, senior vice president of marketing for the egg marketing group, sees the increase as being partly about the shift toward protein-based breakfasts as well as the fine dining trend that has turned eggs into the same type of dish-finishing flourish as bacon.

"The fact is ,there is nothing that isn't improved when you put a well-cooked egg on top of it," says Ruhlman.

- See more at: http://www.northjersey.com/food-and-dining-news/recipes/versatile-eggs-are-good-source-of-protein-1.842491?page=all#sthash.E0M8dGHy.dpuf

The egg is golden

Steadily increasing costs for eggs apparently aren't dampening consumers' demand for them, according to the American Egg Board, the trade association responsible for generic U.S. egg marketing. With American consumers increasing their consumption by three eggs per person per year for the past three years, U.S. consumption is now the highest it's been in seven years, the Egg Board says. We all now eat just a little over 250 eggs yearly.

Per-capita egg consumption rising

USDA has forecast another year of rising per capita egg consumption in 2014. In the short-term supply outlook, USDA reported the hen flock producing eggs for consumption stood at 294 million as of February, which was 1 percent higher than the previous year. With this increase in hen numbers, table egg production in first-quarter 2014 is forecast at 1.7 billion dozen, slightly over 1 percent higher than a year earlier. With somewhat lower feed costs and strong domestic prices through the first quarter, egg producers should have an incentive to continue to expand production. The current forecast for 2014 is for slightly higher production throughout the year (averaging around 1 percent higher).

However, that predicted increase in supply doesn't seem to be dampening egg prices. USDA's benchmark wholesale price for a dozen large eggs in the New York region averaged $1.43 in first-quarter 2014, about 13 percent higher than in first-quarter 2013. This increase comes on top of a 17-percent increase in first-quarter 2013 compared with a year earlier. With the Easter holiday in late April this year, egg prices began to strengthen seasonally in February. Althought they are now expected to decline seasonally after the holiday--forecast to fall to around $1.22 to $1.28 per dozen--that 12 percent fall from the very strong first quarter prices will still be 14 percent higher per dozen than the previous year.

In its annual report, the American Egg Board attributed the egg's continuing success to today's trend toward protein-based breakfasts, coupled with trends in white-tablecloth restaurants to add eggs as plate-presentation flourishes. The Egg Board has heavily emphasized market messaging that promotes the egg's nutritional story and its continued role in the weekday breakfast plate. It reports studies now show eight in 10 consumers agree with the statement that eggs are a nutritional choice

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.


In patnership with the Nebraska Grocery Industry Association

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.


Supported by the Nebraska Corn Board

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.


S5 Box