Looking at the market screen during the writing of this article, I am seeing a lot of red in the grain markets. Lower prices are nothing new in the marketplace. We all know that what goes up usually comes down. However, in the current economic climate, the trip down is a lot further and could hurt a whole lot worse than in years gone by. Even though we are not seeing markets as high as they have been in months past, the prices for our grains are still very good.
So, why is there so much worry?
The question is a valid one. Markets are higher than in year?s past. Farmers have made some decent profits in the past couple of growing seasons. Producers who have gotten good advice or know the game, have been able to maximize their incomes. But, now we are starting to have to pay the piper.
While we cheered the rise in prices, many producers said that it wouldn?t last. Either the prices would go back down, or companies that provide inputs were going to want a bigger piece of the farmer?s pie. While we have seen those markets settle back a little bit, we have seen huge increases in fertilizer prices. We have also seen the rise in seed prices, crop protection, and even equipment. Right now, the used machinery market is so hot that good quality equipment is bringing very near to it?s new prices decades ago.
This is where the concern gets more frightening. If we were to see a market collapse to prices we saw before this increase, a lot of farms would likely go under. Family operations that have been going for generations may have to fold. That adds to economic and emotional stresses. We just came through suicide prevention month earlier, and the talk of mental health and farming has been on the rise. Face it, there is a lot at risk.
As the title suggests, the Ag economy is walking a steep ledge in an Iowa wind. Volatility is both giving us fragile support and pushing down on us at the same time. Yesterday, I talked with Jacob Burks of AgMarket.Net about the situation farmers are seeing right now as it pertains to volatility. First, he highlighted the export angst we are facing and how it is affecting the prices farmers are getting paid at the elevators.
Another issue is in the Black Sea region. Russia?s invasion of Ukraine has put all kinds of stability in the world markets. Ukraine can?t produce grains at the levels it once did, and that is leading to hunger issues on three continents. Russia wants to annex parts of the Ukraine, including areas known for grain production. While Putin preaches that the west wants to conquer Russia and split up its natural resources, the only one doing such a thing is him.
Putin has tried to save face by allowing limited grain exports to leave Ukraine to impoverished countries that need food. Of course, that is after Russia reportedly took what it wanted for itself. However, we have also seen Putin?s ego on full display. He always threatens to pull out of the grain shipment deal, especially after he gets embarrassed by the Ukrainian military. It?s no more than a transparent power play to starve the world into supporting his goals of reuniting the Soviet state.
But that?s enough time spent giving Putin attention.
This problem we are seeing with transportation of grains is affecting us in another way as well. Where do we put the grains. Some elevators have stopped accepting sales and deliveries, or they have lowered their basis so much that it is discouraging for farmers to even think about selling it. So, how do you hang onto it? It?s causing storage problems for the export chain; top to bottom.
Now, you may be thinking that if the export market isn?t that hot, let?s sell it to domestic processors. That is generally a good idea. However, if you are first having that idea now, you may be too late. Burks talks about what the situation is for soy crushers and ethanol producers.
Jacob has told us on numerous occasions that the worst thing you can be doing for a marketing strategy is to do nothing. He talks about some of the things that producers should be considering when they are looking at their individual situations. Therefore, it is important to get the advice a marketing advisor.
You can get more advice from Jacob or his colleagues by checking out AgMarket.Net.
