Trade remains one of the biggest influences on grain markets, but shifting global supply patterns and rising production costs are also shaping the outlook for farmers. Garrett Toay, owner of AgTraderTalk, says trade is the top factor he’s watching, while input costs remain a key concern for producers. He explains.
“I do think the trade is number one. I’m a producer as well, and the big thing I’m concerned about is obviously inflation and put on the increases of fuel costs and what their impacts are on my cost of production.”
Toay says strong U.S. corn exports have partially been driven by changes among the world’s major corn suppliers.
“A lot of this increase in corn export business that we’ve had out of the U.S. over the last couple of years has largely been supply and demand driven, and it actually seems to be changed by policy changes in other countries. Obviously, just from a back of a napkin view, there’s four major corn exporters in the world: Ukraine, United States, Argentina, and Brazil. Obviously, Ukraine has been in the middle of a war the last four years, five years, and they were the cheapest supplier to that point, but then kind of coming off the table. You’ve got Brazil changing their focus from exporting their excess corn supplies to converting that into ethanol to which they use domestically. That removes their exportable surplus as well. So that demand has shifted back to the U.S.”
He notes that China remains a major buyer of U.S. agricultural products, but opportunities are emerging in other parts of the world as well.
“I think where there’s areas that you can tell if there’s been improvements, I think it’s like an ethanol markets into the Southeast Asia, things of that sort where that can kind of help introduce our products into those markets, and benefit us in that way.”
But even with these growing export opportunities, Toay says producers can’t afford to lose sight of rising input costs. There’s a possibility that grain prices could retreat from current levels.
“It’s concerning because ultimately we know that at some point, we’ve been through this many times before, where grain prices don’t sustain these levels, and they go back down. And when those grain prices do go down, you know the inputs take a lot longer to catch up. So, we just have to be very smart in our marketing, potentially looking at multi-year forward sales or hedging and make sure we’re prepared because you know corn could go sub $5 and diesel still at $4 or $5 – that doesn’t really help anyone on the ag sector.”