Economists grasp for opportunities to improve crop markets during Ag Outlook Forum

<![CDATA[

MORGAN, Minn. — As Mark Schultz made his drive northward from Dallas, Texas, to the Minnesota Farmfest grounds near Morgan for the 35th year this week, he witnessed some of the best crops he’s ever seen.

“It is the best looking crop I’ve seen,” Schultz, a marketing analyst for North Star Commodities, said Wednesday morning during the Farmfest Ag Outlook Forum.

And while that great crop is what every farmer is striving for, it will not be in the farmers favor as it relates to crop prices. Schultz was asked to comment on the commodities and said it’s going to take a significant drop in acres and lower yields to start bringing crop prices back up. He said a corn crop in excess of 180 bushels an acre would be bearish on the markets.

“The last thing you want to see is an increase in corn acres,” Schultz said.

While the upper Midwest was hurting for rain, recent rainfall across the state likely saved many farmers’ yields. In comments before the outlook forum, Minnesota Ag Commissioner Thom Petersen said while some precipitation is referred to as “a million dollar rain,” he considered this last round “a billion dollar rain.”

Schultz agreed that had major corn growing areas not received that rain, the yields would have taken a major hit. But it also could have been friendly to the market.

“The rain that you picked up last Friday was anywhere from a 20-30 bushel per acre swing on the size of your crop,” Schultz said. “Had you not picked up that rain, where you got an inch or less, we would be talking about something that is 25 cents higher on corn, 50, 60 cents higher on beans. I think it was just that big of a difference maker in the crop report.”

The good news is that Schultz believes in market cycles, and if the three-year cycle holds true, we could be nearing the end of the lower prices for major commodities of corn and soybeans.

“I believe we’re either in a three- to five-year cycle pattern and we’re bottoming out,” he said. “If I’m right, we’re in a three-year pattern, and it’s going to start to pull back on up and start seeing prices down the road.”

He is hopeful that more trade can be developed to move what could be another record crop.

Schultz outlined other major players in the crop markets right now. Friendly to crop prices are continued strong exports, which include recent purchases by China. Helping to take some pressure off is a record drought that is hurting crops across Europe.

Unfriendly is that South America has record corn and soybean crops.

North Dakota State University Extension crops economist Frayne Olson was on the Farmfest panel for the first time and urged farmers to hang in as better times were on the horizon.

“Make sure you get through this low spot, and it will get better,” Olson said.

He emphasized that trying to bring down input costs on the farm is going to be very difficult as he does not see fertilizer costs coming down this year or into next spring.

“I do think it will be important to try and price some fall fertilizer soon,” Olson said. “Try and get that on as soon as possible. There is a risk that by spring we’ll see higher fertilizer prices again.”

Faith Parum, ag economist for American Farm Bureau said a priority today and for as long as it takes is passing the latest farm bill that has expired and been extended for the last three years. Hope is on the horizon for that policy side of things as the House has passed its version and the Senate is set to mark up its version Thursday, Aug. 5.

“Getting that through will be really helpful for again to provide policy stability for the other farm bill programs that weren’t on this,” Parum said related to those areas of the farm bill that were not addressed by the reconciliation bill, known as the Working Families Tax Cuts Act.

A key part of the Senate and House version should be year-round E15, according to Brian Werner, executive director of Minnesota Biofuels, who was also part of the panel. That would further add to crop demand moving forward. The House included year-round E15 in their version and he has more hope that it will be a part of the Senate version. He was appreciative that Minnesota’s senators were supportive of E15 inclusion.

]]>