The current U.S. and global ag supply and demand situation is driven by many price-influencing factors. This includes weather, trade deals, viruses and technology. Iowa State University Ag Economist Chad Hart joins Mid-West Farm Report to explore those factors and share an outlook for the upcoming year.
Hart has his eyes on the drought out West and if that will work its way East in 2022. As far as international unrest, the Black Sea region – one of three big export areas – is under war conditions. This is pushing grain prices higher.
The supply-demand situation for corn is tight, he says. Planting intentions show the U.S. will see a decrease of 4 million acres of corn planted this year than last year. He notes the anticipated 15 billion bushel corn crop is now at 14.8, creating tight corn stocks. This has pushed corn futures above $7. On the close Friday, April 8 from Chicago, December new crop corn closed at $7.16.
The reason for these prices is due to strong demand, high input costs and inflationary pressure across agriculture, Hart explains.
Zeroing in on soybeans, that’s where those lost corn acres are going. Hart says he sees potential for a record U.S. soybean crop. And the U.S. is depending on more international demand to eat up that crop. Sunflower and soybeans compete in the global vegetable oil sector. The Black Sea is a large producer of sunflower. Because that region is experiencing war, it bodes well for more U.S. sales of soybeans, Hart explains.
While Wisconsin is not a large player in the wheat market, eyes are on U.S. wheat production. Hart says the wheat situation now is “really tight and really tough” as drought impacts key wheat producers here in the U.S., pushing prices up. July new crop wheat closed at $10.58 and a quarter on Friday, April 8. He says high wheat prices are good for producers, but it’s making it hard for the U.S. to export. Meanwhile, Australia and Europe are gaining more market share.
While prices are up, don’t worry about wheat shortages here in the U.S., Hart emphasizes.
Moving on to renewable fuels, the ethanol industry is back to full pre-COVID productive capabilities, Hart explains. Ethanol producers, while seeing good ethanol prices, are facing high costs of operation. He adds that renewable diesel – refined biodiesel made from vegetable oil – is becoming an attractive replacement for petroleum-based diesel. He predicts renewable diesel could take off in the next few years if oil prices remain high — over $100 per barrel.
Hart notes Hurricane Ida and other natural disasters in 2021 have lingering effects on the ag supply chain, including glyphosate. He also gives a preview on the 2022 livestock market.
Hart, a partner at Farm Risk, gives insight into risk management steps you can take for your farm.