Saturday, May 24, 2008



Weekly Market Update Report


Perishables & Non-Perishables


DATE: May 21, 2008

Dairy


CHEESE: Barrels closed at $2.0300 and 40# blocks at $2.0800. The weekly average for barrels is $2.0205 (+.0605) and blocks, $2.0490 (+.0810). Cheese markets are firm as block and barrel cheese prices at the cash CME market have again closed above $2 for the first time since February. Domestic interest is irregular and international demand is lighter with prices over $2.00 per pound. Current cheddar and other natural American blocks remain tight to short.


BUTTER: The butter market closed for the week at $1.50. The weekly average for Grade AA is $1.4880 (+.0310). The cash butter price at the CME continues to strengthen. The cash price has held steady or increased in the past 24 consecutive trading sessions. Churning activity across the country remains seasonally active, although cream supplies for Class IV needs are somewhat less available due to increased usage in other classes, especially for Class II ice cream needs. Domestic demand is mixed as some suppliers indicate that sales have slowed and inventories are building. Others indicate that some buyers are procuring additional volumes and holding them with confidence for future use. Butter continues to be generated for international needs. According to FAS, exports of butter and milkfat for the first quarter of 2008 total 51.7 million pounds, about 9 times more than the same period in 2007. The exports amount to about 11% of the total production for the period. The top five export destinations were: Russia, 15.3 million pounds; Saudi Arabia 6.7 million pounds; Egypt 5.2 million pounds; Morocco 4.2 million pounds; and Australia 2.3 million pounds. These five countries accounted for 65% of the exports over the January - March period.


MILK: Nationally, sales into fluid accounts are steady to trending lower, making more milk available to spoonable products, cheese, and butter/powder production. Ice cream and mix accounts in the West are increasing intakes as warmer weather patterns settle into the area. Due to high intakes and plant maintenance, milk loads surplus to California plant capacities are moving east to find processing room. Some receiving plants are running extended schedules to handle all intakes. Arizona and New Mexico dairy herds are maintaining milk production under current cool weather patterns. Milk production in the Pacific Northwest is steady to climbing, both from seasonal effects and additional cows moving into the area from California. Central region processors are receiving higher intakes this week, as bottler sales are steady and milk production is gaining ground. Both the Northeast and Middle Atlantic areas are experiencing higher farm milk production, which is keeping plants busy and sending some milk into tolling arrangements for various products. Production in the Gulf Coast states is steady to declining. The pace on spot cream and condensed skim sales is slowing as soft product producers ratchet up the number of contract loads coming into plants. Increasing transportation costs in the forms of fuel surcharges and trucking premiums are making it more difficult to finalize some spot cream and condensed skim sales. Feed cost concerns are a main topic for many dairy operators. Hay supplies, which as of May 1, 2008 were 44% higher than one year ago on a national basis, are providing little in the way of assurance for most dairy producers. Hay stocks in Oklahoma and Texas account for 80% of the total increase. Dry soil conditions in parts of the West are leading to earlier use of hay stocks by both beef and dairy operations. Cool, wet conditions in the Pacific Northwest have delayed hay harvest by 2 – 3 weeks, and some farmers are taking first cuttings of alfalfa in the Southeast despite plant maturity being less than optimal for quality forage material.

EGGS: Retail demand remains fair as we come to the end of the workweek. Wholesale trading activities, limited in volume, are conducted at economic levels which are fully supportive of existing quotations. Acquisition interest is finite in breadth, but expressed at financial postures similar to those of completed exchanges. Supplies are in good balance, and held confidently. Breaking stock, both certified and non-certified and in both Regions, is exchanged and sought above current ranges. The market is steady. The trending-lower of dried whites noted here yesterday has spread to the liquid and frozen variants as well, as sellers attempt to balance their holdings among all value-added products. As such, pricing structures have become more open to negotiation as product throughput becomes more important than economic posture.


Commodity Meat: Beef, Poultry, Pork,

Veal and Lamb


Boxed Beef Overview:

PEAK OF THE MARKET

Beef packers increased harvest levels last week to 719,000 head; the largest harvest since 2003 and did so to cover retail forward sold positions. Additionally, weather throughout much of the country was sunny and warm, igniting retail beef sales. Fill-in business during the first half of this week is expected to be strong and will keep packer inventories balanced, despite large harvest levels.


Chuck Meat: Steady

Retailers have found a favorable margin opportunity through the sale of Chuck meat. Korean export activity has also been pushed back 3 or 4 weeks and will not impact the market short term.

Rib Meat: Steady

Rib meat could remain steady at current market values through mid July. The reason? Rib meat never

appreciated during the spring months or the summer holiday season and it is a value. No upside market

appreciation is forthcoming.


Loin Meat: Steady

This is likely the top of the summer market from Strip Loins, Short Loins, Top Butts and PSMO Tenderloins.


Round Meats: Steady but declines are forthcoming

Round cuts are significantly overvalued. Bottom Round Flats and Knuckles will be sold in the Export at premium money to the domestic market. East coast Retailers have procured Inside Rounds at current market value adding unexpected price and volume strength to the Round complex. We may not see price relief until mid June.


Ground Beef: Sharply higher

Look for a sharp increase in Ground Beef prices in front of Memorial weekend and into mid June.


PORK:

The weekly harvest numbers backed off again as packers continued to see reduced margins. Even with the lower harvest numbers, 2.065MM head, weekly production is still above 2007 levels. The cutout value improved steadily throughout the week, but overall packer margins didn’t improve because the cutout increase did not keep pace with the increases seen on the live hog side. If packer margins remain as is we should expect to see production levels continue a slow decline.


Hams: Steady

Overall wholesale prices improved last week due to solid domestic & export demand as well increased volume being pushed toward deli business. Forecasters expect the market to remain fairly steady with some occasional signs of strength throughout the summer.


Bacon: Steady

Last week provided some additional increases in the belly market. At the current price levels buyers should begin to back off. In addition to the potential decrease in demand packers, not wanting to purchase on the open market at the current levels, will being pulling freezer inventory that was secured at a much lower price. As these freezer inventories start to come into play we may see some small downward pressure on the current prices. However, based on current production levels we don’t expect to see any drastic changes in the near term.


Loins: Steady

Loins continued their upward price moves last week in the wake of good retail demand and declining production numbers. Forecasters believe we will start to see some relief or as least a leveling off on both the boneless and bone in loins over the next few weeks.


Butts: Steady

Solid demand helped to push prices last week. Forecasters believe this rally is over and expect the market to remain steady for the short term and decline as we head into June.


Ribs: Steady to soft

Both spare ribs and back ribs continue to build momentum heading into the holiday. Stronger demand and declining production should help this market to remain firm for the short term. However, forecasters do see fairly significant declines as we head into June.


Trimmings: Firm

The trimmings market continues to show signs of strength as we head into the peak hot dog and sausage grilling season. Purchase demand is holding steady even as the prices on both lean and fat trims rose 3 cents and 5 cents respectively last week. Forecasters still see some upside in these markets in May prior to settling back slightly as we head into June.


POUTLRY:

Chicken


The market was quiet this week. Buyers are attempting to gauge near term demand through retail and foodservice channels. Producers are attempting to bring supply more in line with consumer demand while at the same time fulfilling export orders. For the remainder of the month we should see a fairly balanced market. Heading into June we should see the effects of producer cutbacks as well as increased demand in higher prices. For the time being we are at a plateau from which the market should move higher after the next few weeks.


Turkey


Whole turkeys moved higher on increased demand. At this point no major disruptions are seen heading into the holidays.


Veal and Lamb:

Domestic Veal

The late January downward trends previously predicted are not materializing at this time. Livestock prices have dropped a few cents, but have not fallen enough as anticipated and overall remains high. No Change



Imported Bob Veal

Markets are stable. No Change


Domestic Lamb

The market remains steady overall. Loins & Chucks are a weak going into Easter while Racks, Legs and Shanks remain firm. No Change


Australian Lamb

Overall the market is stable. There is an over supply on racks, but current prices aren’t reflecting this as they are very inconsistent. Loins, Foreshanks, Chucks and Legs remain stable. No Change


New Zealand Lamb

Overall the market is stable for the near term. No Change

Seafood


Shrimp

PUDs

Demand is reported to be fair and inventories are about adequate. Higher fuel costs are causing raw material prices to be up on new landings. Pricing is steady to firm.

Domestic Green Headless

Landings have improved in the last couple of weeks, but most of the product is in larger sizes (21/25 ct and bigger). Demand is said to be fair, but has picked up on some smaller sizes while the inventory is not increasing significantly. Pricing is steady to firm depending on size and packer inventory.

Mexican

The season is virtually complete and nearly all product has crossed the border. The season was lower than last year which was one of the highest in recent history. We are still awaiting final number for this current season, but it is still said to be lower than an average year as well. All this means is that inventories are likely to run out sooner and pricing is going to be high and firma for any available product.

Latin American

Supplies are adequate and demand is reported to be good overall. Europe continues to be a strong influence due to exchange rates and demand for head on product. Production is said to be fair and pricing is steady to firm due to the current conditions.

Tigers

Demand is rated as fair while inventories continue to dwindle. The market is awaiting the infusion of new season production which should arrive to the US in the coming weeks. The market is about steady at the current high prices.

Lobster

Canadian Meat & Tails

The Canadian Spring season has not yet started and there seems to be little carry over inventory. Production will hopefully begin in the next 2-3 weeks. Prime and large size tails (5 oz and up) are virtually non-existent and overall pricing is firm. Lobster meat is steady to firm as inventories are lighter than current demand.

Cold Water Tails

South African – The high season will be coming to an end in the next couple of weeks. Currently shipments are arriving regularly to the US. Prime sizes are about the only ones available at this time and pricing is firm for available product due to tightness in the other Lobster markets.


West Australian – Demand is reported to be good. Inventories are rated as adequate although larger sizes are tighter than the rest. This season is coming to an end and shipments to the US will probably end in August. Pricing is steady to full steady depending on size.


Warm Water Tails

Fishing of Brazilian product was postponed for conservation reasons, but is expected to begin soon. Honduras should be starting in the coming weeks as well. Demand is “pent up” and ready to take any product that is available. Pricing is firm. Caribbean tails are reported to be in fair supply and pricing is steady to firm.

Miscellaneous Shellfish

Alaskan Brown King Crab

Demand has improved especially with the Retail sector buying product for features. Inventories are adequate with larger sizes being tighter. Pricing is firm.

Alaskan Red King Crab

Demand is good, but inventories are said to be barely adequate. Retail has entered this market and helped to tighten supplies especially on larger sizes. Pricing is full steady to firm.

Russian Red King Crab

The Barents Sea fishery saw increased landings through the winter which helped to replenish inventories. Larger product (6/9 & 9/12 count) is the tightest now, but pricing still remains attractive compared to historical levels. Overall the market is full steady.

Alaskan Snow Crab

Fishing has been at its peak for several weeks and will begin to slow down shortly. Over 80% of the season’s 56.73 million pound quota is already landed. Japan has placed their orders as has most of the large “lot buyers”. Pricing continues to be steady to firm.

Canadian Snow Crab

Fishing is done until next season. There is reported to be low inventories in the market and with Alaskan prices up, the market is remaining steady to firm for anything that is available.

Dungeness Crab

The season is just getting underway and is not looking very strong at this point. There has been little carryover from the other seasons this year and pricing is steady to firm anything that is available.

Pasteurized Crab Meat

Inventories of product from Indonesia are reported to be lower and a strong exchange rate is also helping to keep prices steady to firm. Production from Thailand has not improved much over the last few weeks and inventories are said to be adequate. Pricing is full steady to firm for most products.


Scallops

Scallops are staying about even. Chinese product is still being quoted out on the market very cheaply and is keeping prices soft on all small sizes despite origin.


Finfish


Pangasius Hypophthalmus (Striped Pangasius, Swai) / Pangasius Bocourti (Basa)

Imports of Swai and Basa catfish from Vietnam are increasing as the popularity of these species grows.




Catfish

International Market: Still seems cautious. Demographics on this product are essential. Some parts of the country cannot get enough of these items and other parts have very little interest. China farmers have some of the same issues the farmers in the US are facing mostly soaring feed prices. Catfish feed mostly consist of soy beans and corn. Some China factories have been hurt financially by the quality procedure timelines that have been extended due to the very thorough inspection process of product entering the country. Short-term prices should be stable with slight movements +/- mostly based on availability and more long-term prices will move upward because of economic pressures.


Domestic Market: Seems to be building momentum up after a positive Lent then a very slow post Lent of 3-4 weeks. The Pond Bank prices are moving upward mostly because the weather is heating up and the water temperature is rising which means it is catfish feeding season. Catfish feed, which consist mostly of soy beans and corn, has moved drastically up in prices from 240-260 a ton in 2007 to 375-400 a ton in 2008. Prices should increase steadily over the next five months. Availability could become a factor later on in the year due to the number of farmers that did not re-stock ponds to normal levels, some converted to a row-crop format because of increasing profitability with beans and corn and/or others exited the catfish business for various economic reasons.



Cod

Look for prices to stay strong and most likely to rise as the grounds price has increased and Cod is in huge demand worldwide. We don’t see any end to this trend in the short term.


Flounder / Sole

With the transition from an Olympic style fishery to that of one with individual vessel quotas, the harvest catch rate has decreased compared to 2007. The total quota will likely be caught this year, but it will take longer to achieve it. The vessels in the fishery will harvest flounder when by catch rates are low, and switch to other species when by catch rates are high. The slow rate at which the flounder is produced is keeping prices firm.


Grouper

Inventories of Domestic Grouper are about in balance with the current demand. China’s Grouper season just began in August with boats expected to return in September. Prices should remain high until such time.


Haddock

Canadian production is running small and catch is nearing the quota. Iceland is beginning to catch but they are on the smaller size as well. Look for firm prices on 8-16 oz. fillets and 16-32. On top of this Europe continues to be aggressive in sourcing Cod alternatives.


Halibut

New season is well underway. As of April 28th, 8,353,000 pounds have been landed. This is almost 1 million pounds ahead of last year at the same date.


Hoki

New Zealand cuts Hoki quota 10%. Fisheries Minister Jim Anderton on Tuesday announced catch limits for the coming fishing season of 90,000 tones. He commented that although it was a difficult decision due to the social and economic implications for New Zealanders it was necessary to the ongoing sustainability of New Zealand’s fisheries.


Mahi Mahi

Taiwanese production has started. Landings are limited, fish are still small, and prices are starting out more that 10% higher than where South American prices ended.



Orange Roughy

Supply from Australia and New Zealand continues to be limited. Expect prices to continue to firm up.


Ocean Perch

Inventories are good and prices should remain stable. Next fishery in Alaska will be in June or July.


Pollock


POLLOCK SHORTAGE CAUSES SURGE IN SURIMI PRICES AND IN DEMAND FOR PACIFIC HAKE

We continue to discover the downstream effects of this year’s 28% cut to Bering Sea Pollock quotas in Alaska. In late March Japanese Pollock surimi buyers completed their A-season negotiations with Alaskan producers, agreeing to an average price increase of approximately 40%.


For the last few years the Japanese buyers resisted increased surimi prices despite significant global price inflation on other whitefish products, including Pollock fillets. In response Alaskan Pollock producers have each year devoted more of their raw material to fillets and less to surimi, with fillet production surpassing that of surimi for the first time in 2007.


This price hike may shuffle that production trend as surimi becomes profitable again and fillet buyers are forced to compete for scarce Pollock raw material. It may also keep upward pressure on Pollock fillet prices at a time when economic worries in the USA have raised the possibility of some relief from the current three to four-year period of seafood price inflation.


As Pollock, in fillet or surimi form, becomes either scarce or too expensive for some buyers, they will turn to less expensive substitutes. Pacific hake (or Pacific whiting) provides the most obvious substitute on the west coast. Next to Pollock it is the most abundant whitefish harvest on the west coast and is of a less desirable eating quality, so it sells at a considerable discount to cod or Pollock. A market exists for low-cost H&G and fillet products, but producers mince much of the annual harvest into surimi.


Even when Pollock was relatively abundant in recent years, Pacific hake producers sold their entire annual output. But with the 28% Pollock quota cut and subsequent surimi price hike in 2008, there is renewed interest in this year’s Pacific hake fishery, which generally runs from mid-May to mid-June. The Canadian and US governments set quotas jointly through the Pacific Hake Agreement and they agreed on a 2008 quota of 365,000 metric tons (MT), an increase of 11% from last year’s quota.


As the season approaches Pacific hake producers report a surge in surimi orders from all markets, including Japan, Korea, Europe, and the USA and even Thailand, itself a major surimi exporting nation. The Japanese orders highlight the tight supply in the market. Japanese buyers had avoided Pacific hake surimi for several years because of the use in its production of egg albumen as a binding agent.


Pacific hake flesh contains an enzyme that, unless inhibited, disintegrates the flesh within 30 hours of catch. Harvesters and processors therefore began using bovine blood plasma to keep the flesh intact. Japanese buyers had no problem with bovine blood plasma until Japan banned it after the global scare over bovine spongiform encephalopathy (BSE, or “mad cow disease”) a few years ago. Producers substituted egg albumen, but Japanese surimi buyers rejected the use of egg in their surimi products and effectively withdrew from the Pacific hake market until now.


Salmon

Atlantic: Market is starting to firm. There are continuous reports about production problems, disease and labor issues. Exchange rate between Chilean peso and US dollar is at the highest level seen in many years. Prices are expected to continue up through the balance of 2008.


Chum/Keta: The supply of Keta is adequate for market demand. With the reduced forecast for Pink Salmon in the upcoming Alaska season, Keta prices will likely increase as customers switch to this species.


Coho: Prices will be firm with tight availability. Catch was only 62% of the forecast for 2007 in Alaska and only 69% of the actual catch in 2006. We should see new season products in September.


Sockeye: Another banner year in Bristol Bay of over 30 million fish has given people an opportunity to really promote this fish. Inventory should be adequate with fairly stable pricing. Indications are that the 2008 season should be a strong one with good returns as well.


Sea Bass

Production in Chile is down significantly and the season is starting to wind down. Look for tight supply and rising prices. Low catch, exchange issues with Chilean peso, and high freight rates are all contributors.


Swordfish / Marlin

Due to high fuel costs, a large percentage of the Asian fleet is stopping operations and prices are increasing sharply. A traditional strong summer is expected.


Tilapia

Supplies from China will continue to be tight until this summer. Fish planted after the winter freezing weather will reach a harvestable size around July, and prices should start to drop around then. It will take a number of farming cycles before prices return to anything close to 2007 prices.


Trout

Sea Trout: Frozen Fillets: Pricing for 2-4s and 4-6s adjusted higher, while 6-8s remained steady but with a full steady undertone. Higher replacement costs have discouraged some importers from buying new supplies. The general undertone is firm.


Domestic: Market prices are steady and production is meeting demand. This is a small volume item when compared to other white fish but that should not deter one from offering this fish as a center of the plate alternative to high priced Halibut and Cod. Our market information is that the 8 oz. natural boneless fillets are being well received and are the most likely to compete with other higher priced white fish.


Tuna

Similar to swordfish in that this should be a peak production time in Asia, but landings have been lower than usual. Overall tuna prices, including those for canning and fresh markets, are at all-time highs, and no relief is expected in the short-term.


Whiting

Whiting Frozen Fillets: Pricing levels trended higher on all sizes for both skinless and skin-on fillets. Supplies are tight for an active demand and replacement costs continue to go up. The undertone is firm.


Miscellaneous Shellfish


Oysters

Supply is good but we see demand equally good. This has resulted in a stable market price. The major issue in this market is Freight. With a heavy wt. box the shipping costs have had a dramatic impact on price. Packing of new Oysters is beginning now and we should expect supply to say steady.


Calamari

The squid picture in New England has not changed. Landings remain limited and most product is going to a very hungry fresh market. The inshore spring run should be starting now, it has not yet. If it does, much of this production will be frozen whole for domestic and overseas markets, as the size of this squid is usually large. Overseas South America production should begin soon – hopefully sometime in May. China continues to produce limited quantities - though it is still early there.



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