Crop tour (LANC)
Pro Farmer released its U.S. crop production estimates on Friday after conducting a tour of farms over the past week. Pro Farmer expects a yield of 168.1 bushels per acre for corn and 51.7 bushels for soybeans. The crop condition was good in the East, but poor in the West. Pro Farmer’s corn yield estimate was below the USDA’s 175.4 bushels estimate from August 12. Pro Farmer’s soybean yield estimates were just below the USDA’s 175.4 bushel estimate. Pro Farmer expects U.S. corn production to be 13.76 B bushels and 4.54 B bushels of soybeans compared to the USDA’s estimate of 14.4 B bushels and 4.53 B bushels, respectively. Pro Farmer’s projections would represent the smallest corn harvest since 2019. Corn prices have increased 10% over the past month, while soybeans are up a modest 4%. A large harvest in the U.S. is needed to rebuild global stockpiles. Soybean oil has been a significant contributor to Lancaster Colony's COGS inflation.
The price of Milk (STKL)
Milk production in the 24 major producing states increased 0.3% YOY in July. For the YTD period, milk production is down 0.7%. The number of milk cows on farms is 0.7% less YOY. The CPI for dairy and related products increased 14.9% in July, accelerating from 13.5% in June. The PPI for dairy product manufacturing increased 21% YOY in July, accelerating from 20.5% in June. The increasing price and cost of milk highlight how the supply and demand of the commodity only play a part in the price. The higher cow feed, fuel, and labor costs are behind the higher dairy costs. One of the concerns for plant-based milk companies in the current inflationary cycle is price elasticity. Planet Oat, supplied by SunOpta, is priced below numerous dairy milk products.
Tasting rooms decelerate (VWE, NAPA)
Tasting room sales at wineries decelerated further in July. YTD tasting room sales in Napa County wineries decelerated from 46.6% through June to 35.4% through July. Sonoma County tasting room sales decelerated from 23% to 16.6%, while Central Coast tasting room sales decelerated from 14.6% to 9.8%. The slower sales growth is largely due to the more difficult comparisons, as the two-year growth in the following chart shows. Even though the comparisons are more difficult for tasting room sales as we lap California’s full economic reopening in June 2021, the on-premise channel is the driver of industry sales in 2022.
