The Reuters article noted that, “[Bret Hays, a farmer in Malvern, Iowa, in Mills County] is sowing crops this spring with his first new planter in about a dozen years, a hulking Deere & Co (DE.N) machine that costs nearly $350,000.
The uptick in the agricultural economy began last year when commodity prices started climbing as China accelerated imports of U.S. crops.
Mr. Polansek noted that, “Values for good-quality Midwest farmland rose 4% in last year’s fourth quarter from the third quarter, while repayment rates for non-real-estate farm loans notched their first year-on-year increase in seven years, according to the Federal Reserve Bank of Chicago.
“Low interest rates, a lack of farmland for sale and record-large aid payments to farmers from the Trump administration are helping push up farmland values.”
“Thanks to that good news and continued low interest rates, the value of farmland continued a long-term increase, with average prices in Iowa up 7.8% from September to March, according to the Realtors Land Institute’s Iowa chapter.”
The AP article pointed out that, “Pauline Van Nurden, a University of Minnesota extension economist, said farmers were relieved the outlook seems so bright after years of low prices, followed by two tumultuous years.”
Beyond the impact on farm income, higher prices for key commodities are also having an effect on resourcing decisions.
As grain prices surge, American chicken giant Perdue Farms Inc. took the rare step of buying soybeans, an American staple, from rival Brazil. BRF SA, Brazil’s top poultry producer, turned to neighboring Argentina for corn, while feed makers in China and the U.S. are buying wheat more commonly used for bread.
The Bloomberg writers explained that, “These tactics and others by the world’s top food companies highlight how tight the global market has become. A gauge of grain prices is at an eight-year high, boosting the cost of feeding animals and signaling higher meat prices could be coming for consumers. Still, keeping up with rising meat demand as the world recovers from the pandemic has industry executives saying the rally is far from over.”
Nonetheless, the Bloomberg article pointed out that, “Feed makers and meat packers could soon get some relief. While U.S. acreage estimates disappointed the markets earlier this year, prices have surged since the survey was carried out. That will likely spur more plantings.”
With elevated international prices seen eliciting a significant supply response in key producers, 21/22 world #soybean output is projected to increase y/y, to a new high. pic.twitter.com/OvPwX8aOpC
The Reuters article stated that, “Argentina, the world’s top supplier of processed soy, is set to produce 43 million tonnes of the oilseed in the 2020/21 harvest, the Buenos Aires grains exchange estimates, which was knocked earlier in the season due the effects of a drought.
“In recent weeks, however, the focus of attention has been on the significant delay in soybean harvesting due to heavy rains in important agricultural areas, which set off alarms regarding potential production losses.”
“This year, the weather pattern has already made its mark in North and South America as well as Australia and Indonesia. Characterized by the cooling of the equatorial Pacific, La Nina triggers atmospheric gyrations that cause water scarcity in some places and floods in others. And the prospect of drought across the U.S. — and difficult weather just about everywhere else — is roiling commodities markets. Combined with falling yields and growing demand from China, the result is soaring food prices and fears of inflation among world governments.”
The Bloomberg article stated that, “More than 48% of the contiguous U.S. was gripped by some level of drought through April 27 and just over 68% was abnormally dry, according to the U.S. Drought Monitor. Drought is particularly dug in across the U.S. West, but it reaches through the Great Plains and into parts of Iowa, Illinois, Michigan, and even New England.
“One reason for concern is that drought can be self-perpetuating. When land is dry, the sun’s energy is focused on heating the air instead of evaporating water. That raises temperatures, which leads to more dryness, which allows drought to spread even further.
“The problem is already affecting winter wheat across the Great Plains and it could creep into the corn and soybean areas of the western Midwest as summer nears, said Don Keeney, an agricultural meteorologist at Maxar Technologies Inc. With rains averaging 40% to 45% of normal levels, the Midwest ‘is drier than a lot of people think,’ he said.
“Crop areas in the Mississippi Delta region are also dry, but they could be helped later this year as the remnants of Atlantic hurricanes and tropical storms move up the center of the U.S.”
Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.