Commodities Report: Soybean Supply to Set Record
The commodity markets have had a fairly uneventful month with grain prices remaining historically attractive for buyers, albeit modestly higher than a year ago. The 2018-19 domestic harvest season has culminated with record to near-record yields in corn and soybeans. The domestic corn supply should be adequate during the next several months, while soybean supplies are likely to be burdensome. The USDA is currently forecasting the 2018-19 available soybean supply in the U.S. to be a record. Add to this that soybean exports to China continue to lag during the time of the year when U.S. exports should thrive and one can understand the bearish bias over the soybean complex. The U.S. winter wheat crop is progressing relatively well with some of the best soil moisture conditions in the last several years. Estimates have U.S. winter wheat acreage near or at its lowest level since 1909. However, favorable growing conditions and lackluster exports should cause U.S. wheat supplies to be more than sufficient. China and the U.S. have continued with their trade negotiations, with reports that the agricultural piece is agreed upon. But this may not mean a lot for U.S. grains as China’s feed demand is lagging due in part to the African Swine Flu challenges with their hog herd. Longer term there is likely opportunities with U.S. protein exports to China, including beef, chicken and pork. Back home, chicken producer margins suffered during the fall due to historically low chicken prices. This has forced producers to pull back on production. Expectations are that year-over-year chicken output this winter may not reach much beyond 1 percent. If so, this should continue to be supportive of the chicken markets. Chicken breast prices rose sharply during December. Pork supplies should be ample in the coming months with the one exception perhaps being bellies due to increased demand. And the risk for higher cheese prices in 2019 is building due to slowed world milk production expansion.