WILLMAR, Minnesota — What falls from the sky in the next few weeks could determine if farm commodity prices go up or down.
The drought that has gripped much of Minnesota and other Upper Midwest states — along with record floods on the other side of the word — is affecting grain and livestock markets, which can create risks and rewards for farmers, according to Mike Pearson, co-host of the TV show “This Week in Agribusiness." Pearson was the keynote speaker Thursday, July 29, at the Partners in Ag Innovation conference in Willmar.
This “wacky weather around the world” is affecting food commodities, which has increased demand and created potential financial rewards, he said. But that comes with increased risks for producers who are in the middle of a drought.
Weather concerns and the tightening of farm commodities has “shocked” market watchers and holds uncertainty as the growing season continues, he said.
According to Pearson, a steady appetite for ethanol, demand from livestock producers and increased purchases by China have resulted in strong corn prices. A shrinking soybean supply, created in part by an increase in value-added production, has brought soybean prices up as well, he said.
“All this demand is happening against the backdrop of a massive drought,” he said, while pointing to a map of west central Minnesota. “Boy, you guys are in the thick of it.”
Pearson predicted prices will continue to be volatile as new weather models emerge and that the market will be “paying very close attention to what’s coming from the sky” as crops continue to grow and harvest begins. Pearson said the “wild card” could be if farms in states like Indiana, Ohio, Illinois and the southern part of Iowa that aren’t affected by the drought will produce enough to offset the expected crop losses in northern states like Minnesota.
“No one knows yet,” he said.
On top of the weather concerns, Pearson said the ag industry is still dealing with the repercussions of the COVID-19 pandemic, which interrupted the food supply chain for producers and consumers.
But because of federal financial support and a strong appetite from consumers — locally and globally — the cattle and pork industries are doing well.
He said despite high beef prices at grocery stores during the pandemic, consumers were willing to pay the price, which shows resilience in the market. Some meat consumers opted for the less expensive option of pork which — along with increased purchases by China — has kept the swine industry profitable.
Pearson said it’s reassuring to know that the ag industry “could handle this size of a curveball” and still get its end product to the consumer.
While food prices will likely continue to be high, Pearson said a side benefit of COVID is that consumers have made direct connections with farmers to purchase locally produced food. He said that puts more money directly in the hands of farmers and keeps consumers in touch with the farmer that produces the food they eat.
While reviewing proposed ag policies in the Biden administration, Pearson said potential increases in set-aside acres in the Conservation Reserve Program may be implemented in efforts to get carbon out of the air and into the ground, which he said could create new options for farmers.
Agriculture is a “player” in carbon-reduction efforts and Pearson encouraged farmers, who he said tend to “lean to the right” politically, to be open to these “new ideas” and potential economic opportunities.
The conference also featured Willmar native Glen Fladeboe, who specializes in farmland sales.
With recent sales of tillable farmland in this region going for more than $8,000 an acre, Fladeboe said this is the “strongest farmland market” he’s seen since 2013.
The pickup in the prices started in September. Low interest rates, increasing commodity prices, a desire to sell before tax laws change and transitioning land to the next generation are all factors that are playing a role currently in the increasing land prices, he said.
He said he’s “slightly less” concerned now than he was a month ago about the impact the drought will have on land prices.
Fladeboe said he expects to see more land come on the market and he expects the prices to stay strong and even increase.
“It’s an exciting time,” he said.
The Partners in Ag Innovation conference was held in-person at the Minnwest Technology Campus but was also livestreamed to a virtual audience. A recording of the entire half-day conference is available on their website, www.partnersinag.com.