Gregg Doud
Gregg Doud, Aimpoint Research VP of Global Situational Awareness and Chief Economist

Market prices across ag sectors have experienced an upward turn. What’s your outlook on the ag economy today?

The overall U.S. ag economy should remain strong through the remainder of 2021 based upon a rebounding U.S. economy and strong export demand. As we approach the end of the first quarter of 2021, we’ve seen the continuation of the rally in corn and soybeans that began last fall. Wheat prices have also rallied but lately have slipped back to where they were at the beginning of the year. 

Cattle prices also rallied during the first quarter but have now slid back as the cattle complex continues down the road of healing itself after the COVID-related losses of last year. Easily the most attractive futures chart, so far in 2021, is over in the hog market. Hog futures prices have been on an ascent, unlike anything we have seen in a long time so far in 2021.

Where do things go from here?

The word is volatility! There is no question that at these lofty price levels we are going to see increased volatility in these ag markets in the months ahead. Extreme competition for planted acres, strong export demand, and an ever-tightening cash market, particularly for corn, soybeans, and grain sorghum will unquestionably lead to market gyrations this summer the likes of which we have not seen in many years. Throw in a weather event at some point during the summer, which is bound to happen, and the turbulence could be difficult for some to handle.

What is your outlook on ag exports over the next 12-24 months?

Ag exports are off to a fast start with January 2021 exports at $15.5 billion, up 31 percent from the same month last year. Ag exports will continue to be strong with growth obviously depending upon other countries’ ability to reopen their economies in a post-COVID world.

The other key factor is the ebb and flow of China’s swine herd in the months ahead. Recent weeks have seen constantly conflicting market signals week-to-week regarding new outbreaks of African Swine Fever and other hog diseases in China resulting in localized culling of herds and volatility in pork prices in China. This volatility has now backed into softness in soybean meal and corn prices in China. In the months ahead, the trend in China’s prices will be a leading indicator for U.S. corn and soybean futures prices.

When thinking about U.S. agriculture, what’s keeping you up at night?

The volatility ahead. Through no fault of their own, folks could potentially get caught on the wrong side of a wild cash, basis, or futures market swing and get badly hurt. Cash markets will tighten. Plan accordingly.

What opportunities does U.S agriculture need to capitalize on right now?

We need good crops to materialize in 2021. With the U.S. economy and other economies around the world breaking through into a post-COVID world, the demand for food and value-added agricultural commodities will be strong. In fact, it already is, and this is being driven by China. Crops will compete vigorously this spring for acres and may the sharpest pencils win. In the end, we absolutely must be competitive on price to get the sale.

In the months ahead our ability to exploit our “window” to export bulk ag commodities to China will bear close watching. The U.S. seasonal export window to China (contra-seasonal to Brazil) is typically September through early February but this year we saw our window stay open a little longer due to a late-planted and late-harvested Brazilian soybean crop. All eyes will be watching to see if this also delays the opening of the U.S. new-crop export window in September. 

Brazil is aggressively pricing its crops right now and everyone will be watching to see how their strategy unfolds as U.S. crops are harvested this fall. For the past six months, our bulk ag export infrastructure has been running at near full capacity. If we are going to expand our exports in the “window” ahead we need to start having a conversation about our infrastructure needs to make this a reality.

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