August report shows how weather, feed prices and war in Ukraine are affecting agribusiness markets
Rabobank released its North American Agribusiness Review for August this week. Below are nine key takeaways from the report.
Corn: The corn market will come down to yield, but U.S. corn crop conditions are the worst since the drought of 2012 and worse than the wet spring year of 2019.
Corn: The grain trade agreement between Ukraine, Russia, Turkey and the U.N. is working well, generating income for Ukraine, moving crops out of storage and opening up new storage, and increasing exports during the traditional corn export window. “Ukrainian corn export expectations are increasing and will ease some of the upward pressure on prices, but any signs of a crumbling agreement and markets will rally,” the report said.
Feed: All main oils used in animal feed have seen a price increase and prices remain volatile. Hay prices recently reached historic highs and alfalfa hay supply is limited. Prices for dried distillers grains with solubles (DDGS) have recently come down after hitting their second-highest level since 2011.
Pork: Hog markets are seeing tighter-than-expected hog supplies and good packer demand, with slaughter averaging 1.4% below levels from a year ago. “The outlook for strong producer profitability will incentivize expansion in 2023, although recent rate hikes, along with greater consumer and regulatory uncertainty (SCOTUS hearing on Proposition 12/Question 3) have delayed some plans,” the report said.
Pork: June U.S. pork export volumes fell 8% and export values 6.5% year over year, with weak shipments to China and Canada and lower sales to Japan.
Poultry: Composite chicken prices are more than 36% higher than a year ago and well ahead of the five-year average.
Poultry: Productivity is still down, with hatchability more than 2.5% lower than historic average and elevated mortality levels.
Soybeans: Export demand is robust, but crop conditions are not improving, which may affect yield. Prices are expected to remain volatile until more information is available on yield and drought conditions.
Wheat: The war in Ukraine and weather are the biggest influences on the global wheat market, which remains extremely volatile. Global wheat crops have been the most affected by La Niña. “Without significant rainfall in the next 30 days, the 2023 U.S. hard red winter wheat crop will be planted in dust. A recipe for another tough crop production year and a strong support for prices,” Rabobank said. Despite this, the market expects wheat supplies will be plentiful in 2022-23.