Commodities Report: There’s Enough Chicken for Every Pot
We are entering the final months of the 2017-18 major crop season with numerous challenges developing. Dry weather has hampered the crops west of the Mississippi River, while too much precipitation earlier this year slowed planting and development in the east. As of this writing, just 60 percent of the corn and soybean crops were rated in either “good” or “excellent” condition as per the USDA. This is down substantially from several weeks ago and compares to ratings in those categories near the mid-70 percent range this time last year. It is extremely likely that the corn and soybean harvest yields will be down from the previous year. But, it’s important to note that this is not a grain supply disaster. Carryover supplies from the 2016-17 corn and soybean harvests are some of the biggest in a decade. So, there is room for error with the current crops. And thus, the market reactions in corn and soybeans have been fairly minimal. The spring wheat crops have faced even bigger challenges with drought-like conditions in the Northern Plains. Spring wheat crop ratings for this time of the year are some of the worst since 1988. And this situation could be compounded by crop challenges elsewhere, including in Australia. We remain very concerned around the potential upside price risk in hard red spring and durum wheat. Protein supplies have generally been adequate during the last month, with beef output tracking well above 2016 levels. Pork and chicken production expansion has been smaller. We’d point out that cattle are being pulled ahead for slaughter due to historically good margins for beef packers. This could cause cattle supplies to tighten later this year. Conversely, the USDA anticipates chicken output expansion to intensify compared to the prior year this fall, which would be welcomed. Chicken wing prices are trending at their most expensive level for this time of the year on record. Pork bellies are also historically expensive, but some price relief is anticipated in the not-so-distant future. It's been more of the same in the dairy markets, with butter prices elevated and cheese relatively low for the summer. Hard seeing much changing there in the near term.
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.