KANSAS CITY — Raw commodity and ingredient prices in 2018 posted wide, mixed changes from 2017 despite significant rhetoric and concern about trade tariffs most of the year. Wheat, flour and egg product prices were mixed. Corn, dry dairy products and cocoa powder prices advanced. The soy complex, equity and crude oil values declined, and sugar prices were little changed.
There was considerable focus on the U.S. soybean market in 2018 because of the trade war with China, by far the largest importer of U.S. (and world) soybeans. China effectively quit buying U.S. soybeans earlier in the year but resumed purchases in the second half of December as the United States and China returned to the bargaining table. Despite the loss of its major export market, soy complex futures saw mostly modest declines for the year.
The March soybean future as of Dec. 14 was down 5% from Dec. 29, 2017, March soybean meal was down 1.6% and March soybean oil was down 14%. The large drop in soybean oil mostly was due to record U.S. soybean crush in 2018. More will be known about trade with China in the next couple of months, but U.S. exports still must compete with a record large soybean crop anticipated in Brazil. Cash prices for soybeans, meanwhile, are lower than reflected in the futures market due to lower basis levels.
The U.S. Department of Agriculture, in its Dec. 11 World Agricultural Supply and Demand Estimates report, forecast the price of soybeans paid to farmers in 2018-19 (September-August) to range between $7.85 and $9.35 a bu, with the midpoint of the range ($8.60) down 8% from $9.33 per bu in 2017-18.
Corn futures were supported by strong exports and feed demand, with the March future up 10% from a year earlier, and the average farm price for 2018-19 forecast at $3.60 per bu, up 7% from the prior two years.
Wheat and flour value comparisons were mixed. The Chicago March soft winter wheat future was up 24% from the end of 2017, Kansas City March hard red winter was up 21% but Minneapolis March hard red spring was down 5%. Cash basis levels were down sharply from a year ago for hard red winter wheat, were mostly higher for soft red winter wheat and were slightly lower for spring wheat. Wheat millfeed prices, the third key component of flour values, were higher to sharply higher in all markets. As a result, flour prices were mixed with bread flours made from hard wheat lower and cracker flour (from soft wheat) up 17%. Semolina was down 19%, largely the result of a 40% larger U.S. durum crop in 2018.
Wheat values also were affected by export competition, mainly from the Black Sea region. U.S. wheat exports overall were forecast by the U.S.D.A. up 11% from 2016-17, but hard red winter exports are expected to decline 14% from last year while hard red spring exports are seen up 32%, soft red winter up 43% and durum up 67%.
Other ingredients also saw mixed results from a year ago.
Dry dairy products were up from a year ago, with low/medium-heat nonfat dry milk up 30% and dry whey up 68%, while other products were up 15% to 72%, except for casein, which was just slightly higher. Cheese and butter prices all were down from the prior year amid strong production and foreign competition.
Egg product prices were mixed, with dried whites up 54% from a year ago, but yolk was down 21%, in part reflecting strong demand for dried yolk last year, which resulted in excess whites, with the reverse true this year. Frozen and liquid egg products showed similar moves. Egg product prices were very stable from August until recent declines in early December. Breaking and retail egg prices were down sharply from a year ago, while egg product demand has remained brisk.
Prices for basic cocoa powder (10% to 12% natural) were up 13% from a year ago in a mostly routine market amid signs of increasing demand based on rising quarterly grind. Cocoa bean futures continued to exhibit considerably more volatility, due largely to speculative trading.
Refined sugar prices mostly were unchanged from 12 months earlier as beet processors and cane refiners already were very well sold for 2018-19, although there was a brief dip at the start of the new marketing year in early October.
Red meat prices were mixed with pork lower due to record high supplies much of the year and beef modestly higher.
Outside markets were mostly weaker, with West Texas crude oil down more than 15% from a year ago (although diesel fuel prices were up 9%) and falling below $50 a barrel for the first time since October 2017 on concerns of oversupply amid a global economic slowdown. Equity markets dipped into corrective territory with the Dow Jones average of industrial shares down about 4.6% for the year early last week (up 25% in 2017), and the broader S&P500 down 4.8% (up 22% in 2017). The value of the U.S. dollar also weakened, which was positive for U.S. exports as it makes for better values to foreign buyers.