Market Updates for June 5, 2020
Dairy | Eggs
Small - Flat
Medium - Decrease
Large - Decrease
Retail demand is staying relatively flat while food service continues to come back to live. Carton availability is still playing a role in the amount of product that is showing up on retailers shelves. All eyes are on food service volume the next few weeks as restaurants continue to open up with capacity restrictions.
Dairy | Butter
Butter production has started to take a backseat this past week as more and more cream supplies are being put into ice cream and other cream based products. While prices are still continuing to increase the rate at which has slowed. Butter inventory levels overall remain ample.
Butter - Increase
Dairy | Cheese
Barrel - Increase
Block - Increase
Cheese inventories have tightened up recently causing the short term price rally to continue. Lighter milk production is also playing a factor. Cheese producers are not sure how long this price rally can last but with both food service and retail orders up they will continue running as much as they can. Milk is no longer trading at a discount like it was during the height of the COVID-19 shutdown.
Grocery & Bakery | Soybean Oil
Equity markets have moved higher as traders are focusing on the optimism of reopening. Restaurant capacity near 50% has helped demand begin climbing back from the pateau. Soybean oil has approached the upper end of the current trade range, so there could be a minor decrease in the near future. However, optimism seems to be driving the markets so there may be some more upside over the next 30 days. The weather has been extremely favorable for planting and most acres got in without any challenge. Ending stocks for this year and proejctions for next year are showing large increases for both corn and beans. Without any major usage changes the looming supplies could put a limit on the upside in the market longer term.
Grocery & Bakery | Sugar
Beet planting is complete. Delays in the Michigan and Idaho due to replanting after early frost and flooding led to the crop getting planted a little later than normal. Condition ratings are high, so far, which gives us a high yield projection. Price indications for both 2020 and 2021 have been identical to spot offerings. Most manufacturers are sitting on the sidelines waiting to determine what their new volumes look like as the country slowly reopens. Mexican can sugar harvests are close to completion, with total actual weight down approximatley 20% from the 2018-19 campaign due to drought conditions. On paper that gives the appearance the US will get less sugar from Mexico, but with demand curtailed due to Covid-19 it's proving difficult to understand what this drought will really mean. We may be a few months away from gaining a true understanding if imports from Mexico will fall short of normal projections.
Grocery & Bakery | Flour
The USDA estimated the upcoming wheat crop to be 1.86 million bushels. Demand was lowered to 2.0 million bushels. US ending stocks for 20/21 are projected to be a record 310 million tonnes, driving a flat priced forecast for the new crop year. Winter wheat crop ratings were lowered this week as dry, windy weather has damaged some of the crop in the Oklahoma and Texas growing areas. Corn futures are still hovering near $3.25 per bushel, and historically low value. Until the corn market finds any upside, movements in wheat prices will be limited.
Meat | Pork
Production is back and demand is down, creating price reductions for most items. Ribs, cushions and bacon are holding or increasing in price. There is talk that the export picture is not as rosy as it once was for packers. Possibly leaving more product on the market. Marinated butts, are still not available we should see these soon.
Meat | Beef
Surprisingly we have seen the harvest number and capacity at the packing plants come back much quicker than anticipated. This week is on par for 630K head, over 95% plant capacity. This will probably be the run rate short term while plants continue to adjust to new environments. During the weeks of reduced production prices jumped to record levels and put pressure on demand. Reduced demand combined with production back to almost normal levels we are starting to see downward pressure on boxed beef pricing. This week its really starting to show as we have seen the choice beef cutout, which is the estimated gross value of a beef carcass based on prices paid for individual beef items, drop to 2.95/lb from last weeks weighted average of 3.74/lb. At its peak just three weeks ago, the choice cutout was 4.75/lb. Expect to see flat pricing on middle meats such as ribeyes, striploins, and tenderloins. Thin meats will be flat to lower; sirloins are showing some weakness so expect to see lower levels. Chucks cuts, grinds, and end cuts such as insides, flats, eyes, and knuckles are all going lower. The largest drop was this week with some going down over 40%. Expect to see slightly lower prices on these items into next and through June.
Poultry | Chicken
The volatility in the market is settling down on some items and on others we are continuing to see some significant changes. The poultry plants are continued to be hurt by labor shortages. There have been a few with some improvements, but the majority feel this will remain possibly throughout the balance of the year. This lack of production employees continues to keep the processors from being able to further process and leaving some of the products in short supply. The Jumbo Breast market has continued to come off again this week and product is available and in some cases trading below market levels. There have been sales of Jumbo breast meat into retail channels helping to reduce the supply and without that the market would be even softer. The Foodservice business while it is starting to return in some states it remains soft and inconsistent volumes. The medium and select breast markets have appeared to level off and the demand there remains stable. The reduction in the supply is hitting and we will see some of the items in tight supply get even tighter. The demand for deboned dark meat remains very steady and with the reduction in supply we could see some increase in costs in the weeks ahead. The export demand for leg quarters remains a little on the weak side and product is very easily available. Wings of every size continue to be in short supply and it does not look like that will be changing any time soon. Further increases in the market are expected with the reduced supply.
The Jumbo Breast Meat market has continued to fall and is currently at $1.03 and there is trading at a discount to the market. The select and medium markets seem to have leveled off. The select market has remained at $2.40 and medium market has remained at $1.60/lb. Line run Breast Tenders have leveled off and are now trading at $1.25/lb. The demand for tenders remains.
The wing market remains very tight and we are seeing the small wings continue to climb. Jumbo whole wings have remained at $1.58/lb and medium only moved up a $.01 and are at $1.81/lb and small continue to climb and are now at a new 52 week high of $1.99/lb. Expect wings to remain in short supply with strong demand in the weeks ahead especially with the reduction in the birds coming up.
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. 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 . 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 of Russian fillets.
Pricing has begun to soften as demand has dropped off on orders overseas. As orders begin to pick up you will see a rise in cost come fall. Inventory levels remain healthy.
Pricing has begun to soften as demand has dropped off on orders overseas. As orders begin to pick up you will see a rise in cost come fall. Inventory levels remain healthy.
The overall Pollock supply for 2020 is expected to remain relatively stable . 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. Per the Seafood Source publication... The largest fishery by volume in the U.S., the Alaska pollock fishery, is also facing its own set of disruptions, though it has fared better than some as the industry’s "A" season managed to avoid overwhelming disruptions. They have been able to harvest their catch and prices have held up well.
Inventory will remain strong through Summer and into fall. Will see pricing soften through the summer as orders overseas have dried up causing plants to slow and raw material prices to fall. 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. Last fall there was a lack of product being imported in case the tariff was to be increased resulting in a shortage on raw material in Asia. Raw material is now available but is now faced with a severe lack of demand. For haddock out of Norway and Russia the TAC ( Total Allowable Catch) for 2020 is up 25% from 2019.
As the opening of the walleye season resumed May 1st this fishery is still uncertain as to how to begin. Currently the processors have placed restrictions on the quota for the boats as they cannot afford to freeze fish in hope there is demand, and this is a risk they are unwilling to take. For now all that is being processed is fresh and this is done minimally based on demand as the plants are currently operating at 25% due to the restrictions of the virus. At this rate, even though there was a 20 % increase in the overall quota for the season there is doubt that will be caught by the fall. Perch season began on the 15th of May and as last year the processors are selling perch if you take walleye as well. With an estimated 18% reduction in perch quota we expect the perch prices to start out high. The issue is, do you assume high cost perch to cover you for the season and take the risk of this market collapsing if there is no demand? In addition the fishery was unable to fish the spring season prior to spawning and that will also cause an added 25% loss of of this fishery as well. The availability of smelt is limited due to an overall shortage of the product. The season for smelt does not start until the end of June so that is when prime fishing will happen. We are hoping to be able to obtain more product during that time however have heard there is potential the product will continue to be short.
The European supply on zander ,pike perch and euro perch has been more than adequate to date with no interruptions in supply . Limson is covered on all sizes at this time. Costs are expected to remain stable for now as demand has been adequate for reduced Food Service sales. For late summer, fall orders we do expect a softening on cost purely due to the current exchange. Note 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 on all sizes. Costs remain stable for limited demand in Food Service. The S American season does not resume until October. To date there have been minimal supply out of Asia due to the virus. Note we have 4,6 and 8 oz portions that are vacuum packed and can be a great option for retail applications if sold as eaches. We also have 1-4 oz pieces that are currently sold as a cheap option for taco, applications and such.
Vietnam - The Country is locked down because of COVID-19, and may open later in May. Currently some raw material is available, but prices are down because demand has plummeted.Indonesia - The Country is locked down tighter than even Vietnam because of COVID-19. Ramadan is April – May 23. Normally Indonesia only closes for 15 days, but with prices so low and employees so skittish to go back to work, it looks like they’ll be closed all of Ramadan.SWORDFISH Sword is a bycatch of Tuna in Asia, so reflects the same story as Tuna. For now Limson has plenty of supply available in individually vacuum packed portions. This is a great optioon for retial movement where they can be sold as eaches.
In Vietnam the government has started to ease social distancing in a few cities. The suppliers team is back to work full time and has returned to offices but with caution. Small businesses are allowed to reopen and if the situation maintains as it is, Vietnam might get back to normal mid May. Raw material (RM) pricing is believed to be at the bottom in the past few weeks and farmers have been losing money at this current price. Some reduced farming quantity or switch to farm a different species, which will lead to RM shortage later this year. On top of that, farmers were reluctant to start new crops due to high level of uncertainty in global demand since the beginning of the pandemic. Therefore, shortage will most likely occur in Q3 and Q4 this year and might even last until next year if farmers' mentality does not change. Right now, farmers refuse to drop RM pricing further as they are waiting for China's recovery from COVID-19. In fact, demand from China showed minor sign of recovery this month. We forecast its demand will be back to its normal level around June. Once it happens, RM price most likely will face upward pressure.
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 has and is happening but at a reduction (40-50%) due to the COVID-19 pandemic and recent storms in parts of India. They are having hard time getting Brood Stock as international flights are very limited right now. In the short term you may see some good pricing in the market as people are trying to move off old or excess inventory. This will have a larger impact come late summer into fall as this will limit the inventory availability which would cause increased pricing. Current shortages in the market are easy peel, cooked shrimp and smaller sizes on raw PD and PD tail-on as we have seen an uptick in retail and delayed shipments from overseas.
Indonesia has extended its lock down until end of May, and although the factories have an exemption from this they face a shortage on raw and material and work force. This has caused orders delays, along with increase lead times as containers are not as readily available. Currently Tigers have a good supply on larger shrimp (will soften pricing) while the smaller to medium sizes are tighter causing pricing to firm.
We will see a rising market through summer and into fall as shortages continue to develop with the uptick in demand for both retail and food service. Normal harvesting has been disrupted as farmers panic harvested in March and April. Many farmers have reseeded but at 40-50% due to limited raw material. The next harvest is expected in September with a limited crop availability. In addition to limited raw material, shortage of workers and delayed shipments India was recently hit by Cyclone Amphan. It landed in the northeast part of India and has left people without homes and power with the current estimate of over 36 million in damages. The current estimated damages to the shrimp aquaculture are around 30 million which will only further delay product availability out of India.
Prices have firmed due to limited supply,
The spring season starts mid April to early May but may be delayed due to the COVID-19 impact. Boats are being delayed as overall demand is down and cold storage is filling up. You may see some good deals on pricing prior to the market opening up as people will be looking to move inventory out of cold storage.
Smaller PUDs are tight in the market and driving up prices until the new season (April - May) brings in more shrimp. We have see a delay on production as only 25-30% of boats have gone out in recent weeks.
Rock shrimp production in both the US and Mexico was a bust this past year. Virtually no inventory and very high prices. Domestic rock season starts again July/Aug.
Seafood | Lobster
The lobster market has been heavily impacted by COVID-19. Most items (tails and meat) are heavy in Food Service so demand has dropped off significantly. As a result prices have been reduced as of late but with minimal demand it has had zero affect. To date the bigger issue is the restrictions at the plant level where foreign workers were banned entry into the region and the work force in general is older and not as efficient. That and the reduced production due to COVID restrictions has limited the amount of lobsters being processed into tails at the moment. As of late the majority of lobster has been sold as whole cooked and or whole raw worldwide as the lower boat price has made this a great offering for retailers. Expect costs to bottom out and possibly rise as the Canadian season wraps up before Maine resumes.
The WW tail market as for the N Atl market has decreased in demand for the Food Service sector. To date we have supply as the new season will not resume until June, with first arrivals expected in July if the country can resume production due to virus related issues. Costs have softened at this time with plenty of supply
Seafood | Crab
In Canada, the country's Department of Fisheries and Oceans (DFO) has released its new total allowable catch limits for the snow crab fishing areas off the coast of the Newfoundland and Labrador province, granting an overall 10% increase to 29,551t in 2020, compared to the 26,894t permitted in 2019. Note the provincial government has backed the processors proposed min price of $2.90 CAD but recently relented due to serious rebuttal from the Fishermen and have now increased that cost to $3.50 CAD . To date in the gulf there are 13 grids closed until Nov 15th,2020 and another 9 temporary closures as of May 27th This has now caused some panic price increases this week as the concern is if the entire gulf will be shut down before the quota has been caught. Regardless, initial costs for the 2020 season are at a significant reduction compared to 2019 on the 5/8 which is the most prevalent size where volumes of 8 ups are reduced and 10 ups are extremely short. As catches continue out of Newfi the crab seems to be getting smaller so expect the price spread to grow between 5/8 and 8 ups if this issue persists. Even though Newfi is off to a good start, the crab that is coming in is sold as soon as it is processed . Many processors are behind on orders as the demand for retail needs has been astronomical compared to other years with the absence of food service sales and absence of other notable proteins; beef, pork etc. That and the closure of buffets and casino business has caused a sever lack of demand in the FS sector. One processor noted that in the past they typically move 20 loads per week that movement has now doubled. We have also been told that Japan is paying the costs presented as they have some concern of being able to procure all of their needs as well. So with approx 57 % + of the gulf already caught, Japan already having a presence in Newfoundland, More gulf closures and at best less then 2 months left in the season all bets are off on the continued availability of product and a competitive cost.
Currently the seafood sector reports that king crab is selling well in retail with very minimal sales in Food Service as expected. Right now the market is stable and larger size king crab remains somewhat limited and tight. Costs have leveled off on current inventory. Some processors indicate costs will firm by the summer.
Seafood | Scallops
Due to COVID 19 and the fact that the Food Service sector has been greatly challenged many expect there could be a significant downturn on cost as the boats get fully underway. The quota has changed drastically with reduction of closed areas and the reduction of NEast closed area fishing as well. In general: 17-20% reduction in total catch = forecast is about 10 million # less than 2019. Nantucket “deep” south = forecast is 6.2 million lbs which is currently shucking meat counts of 40/50s and smaller – so this may see a full effort from the boats depending on price or many may decide not to fish due to the increased work, days at sea as this takes a lot more effort for 1lb of scallops, puts added pressure on the guys on the boats, and takes double the time. Boats will fish but its another 6 million lbs that WILL NOT BE 10/20s and bigger reducing total availability of these larger sizes. Less trips, less money for 40/50s , more southern/mid-Atlantic scallops ( that have reduced quality in summer, and possible parasites in south areas) will potentially see many boats spread their fishing out and lower the landings in summer that can drive the auction lower. In general movement has been minimal. In general ; Quality scallops from northern mid, open areas and the Northeast limited fishing areas have been in high demand and have higher boat price average than the southern areas due to quality and size mix. All larger scallops are short and will stay firm for year and more than likely thru 2021 due to fishing area rotation and stock size. Retail / Club – demand is up 30-40% which is putting pressure on buyers to take positions now as there will not be enough to fill demand later in year and prices will more than likely firm. Quota is cut 20% on paper but, fishing is spreading out, small 20-30=40/50s will also be another 15-20% of catch further reducing the prime demand sizes
With China getting back up and running we are now seeing production plants are running at around 60%. The problem that China is now facing is the lack of Demand due to the COVID-19 impact around the world. We were able to pull our orders ahead for Lent which provided a healthy inventory to get us into the Spring / Early Summer. Pricing could soften as we see the markets begin to open and new product arrives in the market.
Seafood | Salmon
A Mild winter in Norway has given good growth and should provide steady volume throughout the year with estimated peak harvesting volume in Sep/Oct/Nov. The volume to Asia has been increasing again after slow growth during Covid-19, and although the volume to Europe is still behind it is expected to increase as restrictions decrease (restaurants have started opening). The volume to US is still behind, but this is largely because there is limited air cargo space for fresh Head-On-Gutted. Estimate increase in cargo capacity in 2H. The Price to farmers has been very stable at around NOK 50/Kg (or slightly below) for the 3-6 Kg sizes, and the larger sizes have actually been cheaper (unusual, as they are preferred by fresh customers in Asia). Prices are well below last years prices at the same time. With increased volume in late summer/early fall we should see further downward pressure on prices to farmer, but the big question will be exchange rate. The USD is currently strong against the NOK, but it is very likely we will see the NOK strengthening against USD when challenges with Covid-19 ease come fall. So although lower raw material cost is expected in the fall, this can be somewhat offset by a stronger NOK, but it will all depend on how much change we see from exchange rate. So prices in 2020 will be at a lower cost then 2019 and there are clearly good buying opportunities, but the forecast for 2021 does predict increased prices from 2020 levels as demand will again match or out-pace supply. Another question here in the US is also what will happen with other protein supply (meat/poultry) as we are seeing shortages already with demand far outstripping supply. How long will this last? Will customer be looking for other sources of protein (seafood) as a result of this? What will this do to demand on seafood? Only time will tell. As a final note for Norwegian salmon all portions 4,6 and 8 and E trim fillets are vacuum packed and can be sold as eaches for retail customers.
As supply has become more available a massive drop in foodservice demand as the COVID-19 pandemic widens, has prompted mass closings of bars and restaurants and caused US salmon prices to fall, not rise. While US foodservice demand for salmon has dropped, the picture is not all gloomy, as the retail sector has been booming and has taken up some of the slack. Note for fresh however with Latam airlines declaring bankruptcy there is limited cargo space capacity for export shipments.