Grain and Farm Supply Reports
Reports from CoBank Knowledge Exchange focusing on the grain and farm supply industries.
In a world market awash in grains and oilseeds, the profit outlook for storing corn and soybeans in the U.S. is much improved for the 2023-24 marketing year with buy basis for elevators falling to more normal levels and with carries returning to futures markets.
As ag retailers continue to contend with structural and operational challenges, including higher costs for labor and insurance, their customer is also evolving. Farm operators are demanding more data-enabled agronomic tools and new ways of doing business.
Following an extended period of inverted futures markets, the outlook for elevators storing wheat has improved. Carry in the futures markets has returned and the buy basis has widened after a bigger U.S. wheat harvest.
Results of the Pro Farmer Crop Tour project smaller corn and soybean crops in the U.S. as drought and the record heat index lower yields, especially in the western Midwest.
On July 20, the Indian government banned the export of non-basmati white rice to “to allay the rise in prices in the domestic market” stemming from threats posed by Black Sea geopolitics, El Nino and extreme climatic conditions in other rice-producing countries. The ban affects 7-8 million metric tons of Indian rice exports, or 15% of global rice trade.
The increasing frequency and severity of global catastrophic events over the past decade have inflicted major financial losses on society, the insurance industry and agribusiness. U.S. losses to catastrophes totaled $170 billion in 2022, which is about triple the long-term average dating to 1980.
Grain merchandisers have endured rising costs of storing, or carrying, grain and oilseed inventories over the past year due to rising interest rates, high crop prices and rising operating costs like transportation, insurance, fuel, electricity and labor
Grain and farm supply cooperatives have delivered tremendous value to their customers over the past three years, a period that featured extreme volatility in prices for grain, fertilizer and energy as well as unpredictable economic activity stemming from COVID and the Russia/Ukraine conflict.
To the surprise of most observers, wholesale fertilizer prices and natural gas prices have been declining since last fall, both globally and in the United States.
By producing fuel using sources with lower carbon intensity compared to traditional petroleum based products, the U.S. biofuels sector is well-positioned to play a major role in reducing greenhouse gas emissions.
Although precision agriculture has been around for more than 25 years, the past decade has introduced advanced computing technologies such as data analytics, artificial intelligence, connected devices, robotics, and automation.
Russia’s invasion of Ukraine has shaken up global agricultural markets, including vegetable oil. But some perspective is needed: Even before the war, global vegetable oil prices had appreciated sharply. Since 2020, vegetable oil prices are up 113% versus gains of 51% for soy meal and 71% for unprocessed oilseeds.
Global grain markets have been managing through a period of extreme price volatility following Russia’s military invasion of Ukraine, a situation that has reignited the grain rally of 2020-21.
U.S. crop farmers and the farm supply cooperatives serving them are facing operational anxiety heading into 2022, driven by high fuel prices, shortages of agrochemicals (herbicides, fungicides, insecticides) due to COVID-related disruptions and, most importantly, the recent parabolic rise in fertilizer prices.
Ag retailers, including farm supply cooperatives, are benefitting from crop farmers’ strong spending on inputs and agronomic services in a second year of above-average grain prices.
China shook up the U.S. feed grain export market this past year when it nearly tripled its previous year’s purchase of soybeans, and made record purchases of sorghum and more recently, corn.
U.S. farmers are in a sound financial position heading into spring 2021 given the cyclical turn in grain prices and robust government support, both of which have driven a rise in net farm income.
The U.S. Dollar Index saw rapid deflation in 2020 and has coincided with a rally in commodity prices.
An explosive rally in grain prices – driven by a smaller-than-expected U.S. harvest, strong China export demand, dryness concerns due to La Niña, and resulting tight corn and soybean stocks – dramatically changed the complexion of the 2020-21 grain marketing season.
Feed costs have been relatively benign since 2012, helping the beef, pork and poultry sectors to expand more from 2014 to 2019 than in any five year period in the industry’s history. But in the coming year, U.S. livestock and poultry producers will face more feed cost inflation than they have in over a decade, challenging their ability to recover after a difficult and volatile 2020.
Farm supply service cooperatives remain the dominant form of input distribution in North America.
The economic shock in spring 2020 resulting from COVID-19-led economic shutdowns was unprecedented, causing ethanol demand destruction.
According to an analysis of CoBank’s proprietary borrower database, ag retailers are on relatively firm footing as they prepare for spring following last year’s complicated agronomy season.
Grain elevators face a struggle in the year ahead as they buy expensive basis on corn, soybeans, and wheat at levels not seen in years.
Grain elevators and end users are navigating heightened market volatility as the size of this fall’s corn harvest remains uncertain.
Persistent low margins will likely drive ethanol plants to diversify revenue streams.
Interest, innovation, and investment in gene editing tools like CRISPR (clustered regularly interspaced short palindromic repeats) and TALEN® (transcription activator-like effector nucleases) have heated up in recent years, and will only intensify in 2019.
Trade disputes and large fall crops have been the major drivers of grain markets this year. Both factors have contributed to wider carry and weakened basis.
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