Commodities Report: Crops at a Glance
It’s been more of the same in the food service commodity markets during the last month. Low feed costs have persisted despite challenges with the South American crops. The latest USDA estimates around the domestic 2017-18 corn and soybean crops show the largest feed supply in over a decade. And despite crop challenges with the largest soybean oil and soybean meal exporter Argentina, Brazilian crops look to be nearly ideal. Wheat, however, is starting to get interesting. High protein winter wheat prices in the U.S. recently climbed to their most expensive level since last summer. Drought has gripped a large part of the winter wheat belt in the U.S., and the forecast is for the dryness to continue. The National Weather Service estimates that 47 percent of the winter wheat belt is in a drought. Further, crop ratings are dismal. For the end of January, just 14 percent of the winter wheat crop in Kansas was rated in either good or excellent condition. This is down from 35 percent in December and some of the worst January ratings in a decade. The good news for wheat buyers is that there appears to be plentiful wheat supplies abroad which should temper any further upside in wheat prices. In dairy, relatively engaging cheese, milk and whey prices have persisted this winter despite the largest dairy exporting country, New Zealand, losing production due to drought. Strong supplies from Europe have flooded the world dairy supply as of late. But there are signs of a slowdown in output growth in both the U.S. and in Europe which eventually could bring support to the dairy markets. Consequently, it would not surprise us if cheese is in the process of making a longer-term bottom. Chicken prices appear to have seasonally bottomed with recent strength in the breast and tenderloin markets. These are some of the most expensive tenderloin prices experienced in mid-winter in several years. And history suggest there is almost certainly more upside to the markets. Beef prices have found support as of late due to somewhat erratic production. But beef supplies should be really big in Q2 which could moderate any seasonal price gains.
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.