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Ag Economy Insights | Cape Law Firm

Ag Economy Insights from Dan Basse

This week we attended the American Seed Trade Association’s Field Crop Seed Convention, the updated format of ASTA’s traditional Corn, Soybean, and Sorghum Expo.

One of the highlights of the Convention is a keynote presentation by Dan Basse of AgResource Company, a research and risk advisory firm for agricultural markets. Some of the take-aways from Dan’s presentation are below.

  • As the U.S.’s largest customer for Ag products, China remains an important trading partner, but at the same time it is a dilemma in many other areas of domestic and global policy. As tension in the U.S.-China relationship intensifies, it will impact the U.S.’s largest export market for Ag.
  • China is going to Brazil with increasing frequency to purchase grain, and it is buying Brazilian grain in larger amounts. This may begin to put pressure on U.S. grain prices and production.
  • Speaking of Brazil, although the country’s impact on global grain supplies isn’t a “new” development, there is no denying that Brazil has grown into a grain behemoth that directly influences world prices. Grain markets now tend to react more to weather in Brazil than in the U.S.
  • Renewable diesel will be a market disrupter in several aspects, especially in soy and farmland. Several new soybean crushing plants will be coming online in 2024 and the following years, adding hundreds of millions of bushels of crushing capacity. Consumption of soy for renewable diesel is poised to overtake domestic consumption for other uses.
  • To supply the new soy crushing capacity, the U.S. will need to find more farmland acres to satisfy demand for renewable diesel. This is likely to keep pressure on farmland prices. It should be noted that Illinois cropland has outperformed the S&P 500 since 2000.
  • This also means that there will be enormous supplies of soybean meal that will need to find a market.
  • India continues to grow and is considered to have overtaken China as the world’s most populace country. The country is expected to become a major importer of crops and crop oils.
  • Overall grain yields have been relatively flat for the last 6 years. A number of researchers have looked at evidence that climate change may be part of the reason for flatlining yields as regions that have historically been highly productive are experiencing adverse weather events (especially drought) more frequently. Likewise, this will also drive demand to pull more acres into production.
  • Over the past year the world’s major rivers and navigational channels (Amazon, Mississippi, Panama Canal) have dropped to record lows. Thus, freight and shipping costs have gone up significantly, and movement of grain has slowed to a crawl in various areas of the globe.
  • The U.S. cattle herd is at its lowest level since 1962, which will translate into higher cattle (and beef) prices.

Until next year!

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