Declining Commodity Prices Not The End Of The World

Corn stalksTo refute Chicken Little, the sky is not falling. Last week, I spent some time in Manitoba talking with ag retailers and growers at a Wolf Trax-sponsored tour of agriculture in the Canadian province. In between touring grower operations, research fields and a communal farming colony, much of the talk centered on the recent fall in commodity prices taking place in the U.S. Many of the attendees were near panic stricken that corn futures were trading in the mid-$4 per bushel range and soybean futures had dropped below $12.

When these individuals asked me my thoughts on this matter, I replied with one simple word.

And?

I’ve covered the agricultural marketplace for 13 years now. In the time, I’ve witnessed a seemingly endless cycle of commodity price ups and downs. Heck, in 2000 when I first started working at CropLife magazine, corn regularly traded in the $2.50 per bushel area and soybeans were around $7.50. Back then, the prospect of $4 corn and $10 soybeans would have been cause for celebration. Today, however, following roughly four years of near-steady prices of $7 corn and $15 soybeans, any prices less than these are viewed as something of a disaster.

But if there’s one take-away from my time spent in agriculture, it’s that this industry is very resilient and adaptive to whatever changes come its way. So I have no doubt whatsoever that the majority of ag retailers and their grower-customers will continue to make money from agriculture, regardless of the commodity prices points. After all, with the world’s population expected to hit nine billion in the next few decades, commodity prices will inevitably go back up.

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One comment on “Declining Commodity Prices Not The End Of The World

  1. As we sometimes sit and contemplate what happens with prices of commodities such as corn, soybeans and wheat anyone of us who have lived in the world of agriculture that yeah the swings in prices are here. So I counter by asking all to look at land prices at all time bulging prices – that cost to production is staggering. Look at the price of high quality seed corn with the technology traits, $300+ per bag which covers a dash over 2.2 acres per bag. Prices for fertilizer are nothing short of cough, cough that was a lot per acre. Insecticides, herbicides, fungicides, fumigants cause one to stagger backwards. Harvesting costs rise each year, trucking fees, taxes, licenses, good labor cost to keep good people and we note that $4.00 corn is doable, what? Have you really counted up all the costs for the grower? Even with top management strategies, hedging, watching the market 4X per day we feel the incredible squeeze of the margin shrinking and shrinking. Should we all call the auctioneer, by no means. But I recommend we really count the costs, step into the shoes of a farm manager and see what it takes. Yes there is a good deal of money that exchanges hands but the grower feeds a village full of people each day and does not live like a king – so I challenge us to look at those costs and what the profit margins really are.

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