Commoties Report: Risk of Trade Deal has Declined
The 2018-19 grain crop harvest season is nearing its final stages, with the crops progressing under generally favorable conditions. Heavy precipitation during the early fall caused some harvest delays but the crops are still expected to be historically large, with soybeans a record. Feed supplies should be fine for the 2018-19 crop year, assuming the South American harvests are not hit with any major weather issues.
Thus, historically attractive feed prices are expected to continue to encourage protein and dairy production for 2019. The USDA is forecasting the available per-capita protein supply in 2019 to rise north of 1 percent. If realized, 2019 would mark the fifth consecutive year of a protein supply increase in the U.S.—the
biggest such streak in over two decades.
This should temper the upside in the protein markets for next year. Although milk production expansion should be adequate next year, better demand for nonfat dry milk could bring better prices for such and for cheese. But neither market is anticipated to run away.
Obviously, trade will be important to monitor due to the ongoing disputes and negotiations. The U.S. recently announced a new trade agreement with both Canada and Mexico. The North American Free Trade Agreement will be replaced by the United States-Mexico-Canada Agreement. Not sure this changes much for U.S. agricultural exports except the risk of trade loss has declined considerably.
Important to note is that agricultural trade with Mexico has remained strong throughout the process while Canada has only suffered slightly.
A deal with China seems far away as the two sides debate various challenges, including intellectual property theft. Negotiations are also underway with various other trading partners, including Japan.
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.