Market Update

Market Developments 2017/2018

The latest WASDE (World Agricultural Supply and Demand Estimates) from the USDA provides an initial assessment of the agricultural outlook for 2017/2018.  Global wheat supplies are projected to decline fractionally as higher beginning stocks are more than offset by a production decline following last year’s record. Global wheat production is now projected at 737.8 million tons, the second highest total on record. The FAO World food price index fell for the 3rd consecutive month in April – driven by expectations of increased supply of key staples, but remains 10% higher than April 2016. U.S wheat production for 2017/18 is projected at 1,820 million bushels, down nearly 500 million bushels from the prior year. The year on year decline is due to a sharp reduction in planted area and projected lower yields. US Winter wheat had benefited from diminishing drought conditions in the Plains and Midwest, however, a late April snow storm affected large portions of the Hard Red Winter wheat belt, especially western Kansas.

Total US red meat and poultry production for 2018 is projected higher than 2017. Cattle placements during second half 2017 and early 2018 are forecast higher; these cattle will be slaughtered during 2018, supporting higher beef production. Carcass weights are expected to be higher, the increased production is expected to put pressure on prices during 2017/2018. Despite removing itself the Trans Pacific Partnership (TPP) agreement, the US has signed a free trade agreement with China. This agreement will see China lift a ban on US beef, and the US will allow the import of Chinese cooked chicken. US beef exporters are also likely to benefit from a food safety scandal in Brazil, which has seen a number of countries restrict shipments of Brazilian beef.

US Pork production is also forecast to grow with an increased number of farrowings and improved sow productivity. Export demand is supporting US pig prices, with increased shipments to Mexico, Japan and South Korea. EU pig prices have also continued to rise, driven by strong domestic demand, and increased exports, UK pig producers have also benefited from a depreciation in sterling. The USDA are forecasting that strong milk prices and moderate feed prices will drive an increase in US milk production during 2018, with the all milk price forecast for May 2018 in the range of $17.55 to $18.55 per cwt, compare to $17.34 to $17.85 per cwt for May 2017.

New data from the Canadian 2016 census of agriculture shows that slightly older Canadian producers are planting more cropland on larger farms.The average age of Canadian farmers is now 55 (+1.9% on 2011), in line with a long-term trend towards an aging agricultural workforce in most developed countries. There are 5.9% fewer farms than in 2011 – the lowest rate of decline in 20 years, with the average farm size being 820 acres, compared to 729 acres in 2011.


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