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Commodities Report: Markets Trade at Engaging Levels



The commodity markets have continued to trade at engaging levels for buyers during the mid-fall. Grains lead the way with the harvest and trade issues keeping a lid on prices. Heavy rain has played a part in the USDA reducing its expectations around domestic crop yields and supplies. Despite the reductions, 2018-19 domestic corn and soybean crop yields are still projected at record levels. And the available soybean supply is also projected to be a record.  Add to this that planting for the South American crops is ahead of schedule and it appears that fairly attractive feed prices will persist into 2019 at a minimum. This should fuel solid protein output expansion. The USDA is forecasting beef and pork production next year to grow north of 3%. In the case of pork its north of 5%. Chicken output in 2019 is projected to grow just 1.7%. Chicken breast prices as of mid-November were some of the lowest experienced in the last few decades. This has hurt chicken producer margins and they appear to be tapping the brakes on production expansion.  But this may only be temporary. The chicken industry has been investing in capacity during the last few years with new plants expected to come on line in 2019 and 2020. This should only encourage chicken output during the next few years. 

Milk production growth could be slowed next year due to declining farmer margins. But bigger world supplies could dampen the upside potential in U.S. dairy prices.  Trade remains an issue of the U.S.  Because of lower Chinese soybean imports, U.S. agricultural exports have tracked below year ago levels as of late.  But if better trade develops in 2019 because of these negotiations it could be supportive of the markets.  And we’d offer there are signals that stronger consumer price inflation could be pending later next year and into 2020.  The commodity markets could be a participant in such. 

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