Farmers facing global market volatility | Agriculture
Market volatility, Russia’s invasion of Ukraine and strong global demand for U.S. corn and soybeans are pushing prices for farmers to record highs, local farmers say.
But those same market conditions have caused the cost of agricultural inputs, especially fertilizer, to skyrocket.
“It’s a perfect storm on this whole price issue,” said Taylor Ridge farmer Tom Mueller.
If there’s one area of the US economy that’s still affected by global issues, it’s agriculture, he said.
“Brazil and Argentina didn’t have such a good corn harvest last year, and that helped the price,” he said. “China needs more corn and soybeans.”
Corn delivery for May closed Friday at $7.90 ¼ a bushel on the Chicago Mercantile Exchange, up 6 ¾ cents from Thursday’s close. The last time corn was close to that was in 2012, when it hit $6.67 a bushel, according to statistics from the National Agricultural Statistics Service, the statistical arm of the US Department of Agriculture.
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In October 2021, farmers were getting around $5.02 a bushel, according to the USDA.
Soybeans for May delivery closed Friday on the Chicago Mercantile Exchange at $16.82¼ a bushel, up 6¼ cents from Thursday’s close. Soybeans hit $14.1 a bushel in 2013.
In October 2021, farmers were getting around $11.90 a bushel, according to the USDA.
“Just a few months ago, I could sell corn from the combine for $5.50,” Mueller said. “I thought it was a good price, and then it was. I locked it up. I look a little stupid now because now I could have gotten $2 more.
Scott County farmer Robb Ewoldt said corn and soybeans are in demand for more than food and feed. Soybean oil is also used for renewable diesel fuel, “and jet fuel is made from soybean and corn oil, which amazes me.”
But as prices paid to farmers hit record highs, the cost of fertilizers has also risen.
The war in Ukraine is only part of the problem. A number of supply and demand factors were already at work, driving up fertilizer prices. These include global demand for fertilizer exceeding production, supply chain disruptions and high production costs such as the high price of natural gas, which is used to make nitrogen products such as l anhydrous ammonia.
Mueller said a year ago that a ton of anhydrous ammonia cost him about $450. “It’s about $1,600 a ton now,” he said.
Ewoldt said an acre of crops required an average of 180 to 200 pounds of anhydrous ammonia.
According to the US Department of Agriculture, other popular fertilizers, such as potash and urea, have also doubled over the past year. Potash went from around $400 a tonne to over $800 a tonne, while urea went from around $450 a tonne to around $900 a tonne.
There are even transport problems. Union Pacific is currently imposing shipping discounts on companies that supply fertilizer to farmers.
Kristen South, senior director of corporate communications and media relations, said in an email that the railroad was working with customers “to address the impact of multiple disruptive events.”
To address national supply chain issues, she said, the railroad is removing Union Pacific-controlled cars to ease congestion and has asked customers to reduce their own growing inventory; add 100 additional locomotives to the fleet; train 450 new employees, in a tight labor market, with others preparing to graduate this summer; relocating approximately 80 crew members to support high demand areas; and partnering with customers to begin a measured approach in the coming days.
“This allows us to continue to serve all customers while simultaneously working on a backlog of cars, restoring our ability to handle volume – an approach we successfully applied last year with West Coast intermodal traffic” , said South.
Ewoldt said Russia was a huge producer and exporter of nitrogen, potash and phosphorus.
“They don’t export anything. No insurance company is willing to guarantee the shipment,” he said.
Russia also does not export agricultural products, which are not sanctioned, because no insurance company is willing to take the risk.
Ukraine is also a huge fertilizer exporter to the world market, and of course the war with Russia stopped all that, he added.
What Europe can no longer get from Russia, Ukraine and Belarus, which produce potash, Europe will then turn to other sources, such as the United States
“It could become a situation where these countries that were once supplied by Russia are willing to pay American producers a lot of money,” he said.
Saskatchewan-based Nutrien announced in a press release on March 16 that due to the war, the company plans to increase its potash production by approximately 15 million tonnes in 2022, the majority of that. ci being produced during the second half of the year.
Nutrien’s interim president and CEO, Ken Seitz, said in the press release: “The impacts of this dispute extend beyond Eastern Europe, as a disruption in the supply of key agricultural products, fertilizers and energy could have implications for global food security”.
Government policies in the United States have also left their mark, Ewoldt said.
“Our current president’s policy of wanting no investment in natural gas exploration means we don’t have a chance of finding more natural gas to keep our nitrogen and fertilizer prices low,” he said. he declared.
Ewoldt said that ultimately all the volatility and uncertainty will force farmers to be better, more efficient and look for other fertilizers, like using more manure.
US farmers are expected to add more acreage to soybeans this year and fewer acres to corn.
According to the USDA Prospective Planting Report released March 31, soybean acreage is up 4%, while corn planted acreage is down 4%.
Ewoldt said a serious supply problem could arise with wheat.
“Russia is the biggest exporter of wheat, but it cannot ship wheat,” he said. “Ukraine was the 4th exporter of wheat, but it will be an importer of wheat for the next five to ten years because its infrastructure is destroyed.
Middle Eastern countries that rely on wheat from Russia and Ukraine will suffer because there is no substitute for wheat, Ewoldt added.
“Wheat could potentially increase up to six times in value,” he said. “It’s a relatively low input, low fertilizer and high value commodity. You may see a lot more winter wheat planted this fall. It’s a real possibility right now.