Grain and Farm Supply Reports
Reports from CoBank Knowledge Exchange focusing on the grain and farm supply industries.
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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.
Seed and crop protection rebate programs will change over the coming years due to mergers in the seed and crop protection industry.
The long-term outlook for grains and ethanol is one of cautious optimism, with domestic and global demand expected to continue rising as export competition builds abroad.
The 2018 crop year is likely to offer much better prospects to elevators than producers. Wide carry in futures markets, weak harvest basis, and low transportation rates should provide opportunities for grain elevators to secure healthy margins. A wet fall in the Eastern Corn Belt and Northern Plains will also improve drying revenue in these areas. Demand growth is critical to reduce large stocks and support appreciating basis.
The ethanol industry is currently in an expansion phase. Blessed with an abundant supply of cheap corn, rising domestic ethanol demand and a quickening export pace, ethanol producers marked strong profits in 2016.
Feed mills have enjoyed substantial increases in profitability in recent years as grain prices have fallen, making the cost of their main input more affordable.
Recent studies show that 68 percent of Americans have recently bought organic food items and 44 percent have recently bought non-GMO labeled food. So what impact are these trends in food consumption having on U.S. production agriculture?