Push and pull of the peso in the chicken market
According to the latest USDA poultry import/export report, imports from Mexico to the U.S. from March to April of this year decreased by just over 50%. Exports from the U.S. to Mexico increased by approximately 10%. From March 18th to April 8th, the strength of the Mexican peso to the U.S. dollar increased by approximately 3%. This data follows a common pattern where the value of the peso influences chicken transactions between the U.S. and Mexico. In a stronger Mexican market, processors in Mexico will sell products internally, and processors in the U.S. will export more to Mexico, as it gives them better value for their products. International trade data from May and June are not yet available. From the beginning of June to mid-June, there was a sharp decrease in the value of the peso to the U.S. dollar, followed by a strong increase in value to the current day. Producers have mentioned decreased demand from Mexican buyers over the past couple of weeks. It will be interesting to see if the next report reflects these sentiments.
Tale of two turkeys: turkey deli meat
If you’ve gone into any grocery store over the past three years, you’ve probably noticed high prices for retail turkey products. In May of 2021, wholesale prices of fresh young tom boneless, skinless turkey breast began a steep incline to then flatten out at an all-time high of $6.70/lb in September of 2022 where it held until January of 2023. This pushed retail prices for packaged turkey high but led to a very small difference in the price of retail compared to wholesale of $0.32/lb. Starting in February 2023, wholesale prices dropped sharply, while retail prices have been slow to decline, leading to a price spread of approximately $4.98, the largest spread of the past five years. Wholesale demand for turkey breast has screeched to a halt as retailers maintain inventory that they purchased at high price points and attempt to recoup some of the profit losses they lost during the previous year of very narrow margins.
Egg prices crack under pressure, but still sizzle near record June highs
After a four-week rally that sent prices soaring 63%, the US table-grade market started to undergo a correction last week, due to slowing demand in the retail sector—a culmination of elevated grocery store prices and sweltering heat throughout much of the country. The correction has persisted into this week, albeit at a comparatively measured pace. Prices have experienced a modest decline of only 2-3cts per day, resulting in an overall adjustment of 4.5% week-over-week.
Despite this decrease, prices remain exceptionally elevated for this time of year, standing at the second highest on record for late June, largely due to substantial production losses stemming from this year’s HPAI outbreaks. While no new detections have been reported in June, approximately 14 million layers were lost in the preceding two months, causing the national flock count to drop below 300 million for the first time since 2016. This week’s Chickens & Eggs Report from the USDA shows production levels have since rebounded to 305 million. However, this figure remains significantly below normal, trailing the five-year June average by 4.2%.
Even though spot trade has been negotiable at a discount, supply levels have not posed a significant burden. Rather, sellers with surplus inventory occasionally encounter limited interest, empowering buyers to negotiate lower prices. Given the current high market levels, sellers have been willing to make concessions because even discounted sales remain highly profitable.
The price for EU cream and SMC rallied during the week
The market sentiment for liquid dairy commodities, such as cream and skimmed milk concentrate (SMC) was reported as bullish during the week, with prices increasing notably compared to the week prior. This was primarily supported by strong demand from southern Europe during the week. Buying interest has been largely supported by an increase in seasonal demand as the summer holiday period has started. Additionally, mild weather conditions have supported the seasonal demand during the week. While supply for cream and SMC has been reported as sufficient, processors are unwilling to sell larger volumes on the spot market. As a result, a seasonal decline in milk intakes started earlier than anticipated by many market sources.
