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Commodities Report: It’s a Mixed Bag



The 2018-19 domestic feed crops are estimated to be big.  In the case of soybeans, a new record, up 4.3 percent from the previous crop. The corn harvest is estimated to be up slightly at its second highest level, despite a multi-year low in acreage. Favorable weather has boosted yields and, assuming no major shortfalls with the pending South American crops, generally favorable feed prices should persist at least through the first few months of 2019. Acting as a headwind to prices is the trade issues with China, which has caused U.S. soybean exports to plummet. And even if trade with China does resume, disease issues with their hog herd could temper feed demand and imports there.  Most recently, a bill in the U.S. congress was presented to restart the biodiesel blenders tax credit, making it retroactive back to January 2018 and extending it in some form through 2025. Although this may underpin soybean oil prices if passed, market gains next year are only projected to be modest. The adequate feed supplies are expected to encourage solid protein output in 2019 particularly with pork. Margins for chicken producers have deteriorated substantially in recent months, with breast prices at their lowest levels in more than 18 years. This appears to be causing chicken producers to tap the breaks on production. Lighter weight broiler slaughter has fallen below year-ago levels, causing the premium in smaller bird products to rise. Further, there are signs that bigger broiler output could be slowed as well in the coming months. Milk farmer margins have also been suffering as of late as the herd in the U.S. declines to its lowest level since February 2017. This could be supportive of cheese prices at times in 2019. 

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