Commodities Report: Healthy Expansion in Protein
Believe it or not but the 2017-2018 major crop season is upon us, with the winter wheat crop progressing under more favorable conditions and corn and soybean planting underway. Recent rainfall in the Southern Plains has helped the wheat crop. In early April, 51 percent of the crop was rated in good or excellent condition, which is the second best for the date since 2012. This and the ample carryover supply from the 2016-2017 harvest are dampening the impact of the historic decline in U.S. wheat acreage. The USDA is estimating 2017-2018 domestic wheat plantings to be the smallest since at least 1919. Corn acreage is projected to decline as well at 90 million acres, down 4.3 percent from the prior crop and the second smallest in the last seven years. And although corn supplies are likely to tighten, the impact on prices may only be modest because of large carryover supply from the prior crop. Conversely, the USDA is forecasting 2017-2018 domestic soybean acreage at 89.5 million, 7.3 percent better than the previous crop and a record. Corn and soybean planting are underway with some modest delays in the Midwest. But it’s too early to be overly concerned. If the weather cooperates as anticipated, feed and wheat supplies should be fine into 2018, which is good news for dairy and protein farmers. Due in part to relatively attractive feed prices, beef and pork production expansion has been notable during the early spring, trending near 6 percent above the previous year. This is in line with what the USDA is anticipating during the next several months. Milk output growth in the U.S. has been strong as well which, along with stalling international prices, is weighing on the domestic dairy markets. Interestingly, chicken production growth has been tempered by producers, due in a large part to subpar margins over the winter. But the recent rise in chicken breast prices should improve producer profitability and could lead to better year-over-year gains in output later this year.