Commodities Report: Crop Challenges Persists
Various food commodity markets have found support in recent weeks, most notably grains and oilseeds. Crop challenges have persisted with Argentine soybeans and back home with winter wheat. Argentina is the largest soybean meal and soybean oil exporter, typically accounting for nearly half of all trade. And although building world palm oil output is tempering the impact on soybean oil prices, soybean meal supplies are expected to remain a problem. Thus, the soybean meal markets have achieved multi-month highs. Drought has key U.S. state winter wheat crop ratings at decade lows for the late winter. This, accompanied with a century-plus low in plantings, has brought support to wheat prices. However, the world’s largest exporter, Russia, currently has ample supplies, which is limiting the upside in domestic wheat prices. Believe it or not, the 2018-19 domestic corn and soybean planting season is just around the corner. Expectations are that acreage for both will remain historically large. And, at this point, the planting season is anticipated to be favorable, including for spring wheat. But make no mistake, feed supplies and prices need to be watched here due to the crop challenges in South America. Beef prices have been watched with worry by buyers this winter as they generally average well above year ago levels. However, the USDA is signaling a strong beef output increase this spring with production climbing a whopping 605 million pounds from the winter. If realized, this would be the largest increase for the period in over a decade. Further, the USDA is suggesting that beef output should be north of 12 percent better in Q2 compared to 2017. This could temper any seasonal beef market increases. It may mitigate any seasonal upward pressure in chicken and pork as well. However, the USDA is also showing the largest Q3 from Q2 decline in beef production in several years, which could be supportive of beef prices this summer.
David Maloni is commodity consultant for American Restaurant Association Inc., a food commodity research, forecasting, consulting, and contract risk management organization founded in 1996 specifically advising the US restaurant and hotel industry and supply chain.