Commodities Report: Feed Prices Good, As Well as Protein Forecasts
The major corn and soybean harvests in the U.S. are winding down with another year of solid crops. So much so that the USDA is projecting the available domestic feed
supply through next summer to be one of the biggest in the last decade. This does not guarantee low feed prices will persist, but certainly makes the odds rather high.
The South American planting season is underway with its fair share of challenges. These crops will play a bigger influence in feed prices during the next few months. But the Brazilian soybean harvest, although lower than the previous crop, is currently forecasted to be the second largest on record. Assuming no major crop failures there or in Argentina, and it’s likely that engaging feed prices will continue. The soybean oil markets have been volatile as of late as the Trump Administration has apparently abandoned efforts to cut the biodiesel mandate for 2018. This, and the existing tariffs on biodiesel imports, are expected to cause demand for biodiesel feedstocks to be strong next year. The major feedstocks we are concerned about here are soybean oil and tallow. The USDA is forecasting 2017-18 soybean oil use for biodiesel to be a record. High protein wheat supplies aren’t expected to be as much of a problem as anticipated earlier this fall. The USDA has raised its hard red spring crop estimate, and supplies for such should be adequate. That said, some demand rationing for high protein spring wheat, including durum, is needed, which should underpin prices. Protein producers are excited for the outlook around feed prices and are responding by raising production for next year. However, there are indications that year-over-year gains in chicken output during the winter could be less intense due to earlier layer number adjustments. This could be especially supportive of the wing markets during the next month or two. In dairy, domestic nonfat dry milk stocks are a record, while prices are nearing decade lows. This may keep a lid on cheese prices deep into next year.
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.