Riding high

It’s been seven years since soybean prices have hit the numbers that have come in this week.

For corn, it’s been eight years.

How long those marks will last, or if they will go even higher, is the unknown.

“We’ve seen prices continue to increase,” said Ben Brown, who in January became a senior research associate in agricultural and applied economics at the University of Missouri’s Food and Agricultural Policy Research Institution. He had previously worked at Ohio State University and has served as an agricultural economics source for The Commercial Review since Purdue University’s Chris Hurt took an extended leave of absence and subsequently retired. (See related story.) “Soybean prices were up 30 cents (Tuesday). …

“We saw that with corn a couple weeks ago and they’ve continued on that high peak, breaking $6 earlier (this week).”

A look at market prices locally illustrates the point.

For corn, prices Tuesday ranged between $6.08 and $6.28 per bushel. That compares to a local average of $3.60 on April 20, 2020.

It’s a similar story for soybeans, for which local prices ranged between $14.93 and $15.24 per bushel Tuesday. A year ago the average was $8.32.

Brown noted that prices are not only seeing strong support in the “fundamental side” (supply and demand, etc.) but also that stimulus dollars are finding their way into the market.

He added that there has been some inflationary pressure recently.

“While the federal reserve does have plans in place to handle that, many people don’t believe they’re adequate and are starting to worry about runaway or strongly increasing inflation,” said Brown. “One of the ways you protect against that if you are nervous about it is buying hard assets or hard commodities, which include ag commodities. …

“For corn and soybeans the picture looks pretty solid at the moment. There’s a lot of opportunities for upside price potential. … There’s opportunity for profit right now.”

He addressed a variety of factors that could impact market prices for the 2021 growing season, including that purchases are currently above seasonal paces. China, for instance, as already purchased most, or possibly all, of the soybeans it plans to import from the U.S. this year.

Meanwhile, for corn, China is still a strong buyer and Mexico made a large purchase this week. The concern on the corn side is whether deliveries will be able to keep up, as the U.S. has been lagging 3 to 4 million bushels below export demand per week.

“The challenge with corn is can we logistically get enough ships turned throughout the region … to get that corn exported,” said Brown. “That’s the big question.”

Other concerns at this point include extremely dry weather currently in the western part of the corn belt (the Plains states, stretching from North Dakota to Nebraska) that could result in farmers planting fewer acres. If the dryness stretches into Iowa and Minnesota as well, it could further limit planting and send market prices upward.

Fertilizer prices, which have increased, could also be a limiting factor for farmers.

However, Brown doesn’t expect the current cold snap — Jay County received measurable snowfall Tuesday night and temperatures fell into the 20s Wednesday morning — to have much of an impact on planting. Though the extreme cold for mid-April is more dangerous for soybeans than corn, he said he expects any crops that were already in the ground and damaged by the weather will simply be replanted.

“The market certainly is paying attention,” he said. “Some of them are trying to figure out, ‘Is this going to push planting back to an un-optimal time?’ But we’re certainly not at that point yet where I think that’s something we need to worry about.”

Currently, the Food and Agricultural Policy Research Institution is projecting a market year average of $4.15 to $4.20 for corn and $12 for soybeans. That would be the highest since 2014 for both commodities.

Yield projections are 51 bushels per acre for soybeans and 179.5 bushels per acre for corn. Soybeans came in at 50.2 bushels per acre in 2020 while corn was at 172 bushels per acre last year.

“Those would be definitely on the stronger end, but not the strongest we’ve seen for either one,” said Brown.

As for the livestock sector, Brown had good news for pork producers and bad news for the dairy industry, with cattle falling somewhere in between.

For pork, African Swine Fever and PEDV has begun emerging in Asia. Although they’re not as bad as they were two years ago, some producers in China are taking their hogs to market early because of worries the diseases could impact their herds. That’s pushing prices down now, but could result in increased prices in the future.

“That will have an impact in terms of what we can export as a pork market,” said Brown. “So I encourage people not to get too worried if we start to see lower pork export prices in the near term … It does raise the possibility of increased pork exports at a later time.”

Beef prices have been up and down, but no major market shifts are expected. Brown added that beef consumption has remained strong domestically and internationally.

The dairy industry seems to be headed for another tough year, he added, as milk prices have remained low and feed prices are high.

But the overall outlook for the U.S. agriculture industry is good.

“Across the board, I think livestock and grains, the nice picture here is we’ve got a pretty strong foundation under us and several things working in tandem together that are providing support for prices,” said Brown. “The question on everybody’s mind is, ‘Just how high will this go?’ And that’s the part we’re not totally sure of.”