March Ag Market Update

March 18, 2021 by Heller Group
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The deadline for ARC/PLC crop insurance enrollment past and the snow cover melting, we can feel the spring fast approaching. Seed is being delivered, equipment is being prepared, and producers are looking forward to the 2021 growing season.

Commodity markets have seen some pretty favorable numbers over the last month and without accounting for spring fever, one could assume the producer’s optimism is solely backed by good grain prices. Although that may be true, it is fair to mention the good and the bad come as a packaged deal. What I mean by that is that along with good prices for old crop, there comes a lot of uncertainty for new crop as well as an evident spike in the inputs for crop production. Fertilizer prices have increased by approximately 50%, the price of steel and the demand for labor has driven the cost of machinery higher, and expected prices for land rental and real estate sales have increased. 

It will be evermore important for producers to execute a marketing plan with diligence in order to remain profitable in the coming years. Prices in the futures markets show what information the market has already digested, rather than the uncertainties that lie ahead. Trade with foreign countries has paved the way for much of the upward progress both in corn and soybean prices, and this is noteworthy in depicting what the USDA will have in their future reports. Carry out numbers, projected acres, and projected yield all seem to be pretty malleable at this point in the marketing year. 

Some market analysts warn about the stability of the current contract prices due to weather forecasting (Drought?) and China’s influence in the global demand for our production. With much of our nationally anticipated sales already being accounted for, look at what factors will upset our current trends. Will our production numbers be low and put a squeeze on the supply? Will foreign trades fall through and knock down the demand? What influence does rising crude oil have on grain commodities? Which crops are producers placing an emphasis on for marketing? How long can producers hold onto old crop? 

 

My college professor for my futures and options class always warned “Past Success Does Not Dictate Future Results”, he noted that you must always be willing to learn from history rather than expect it to repeat. I think these charts are worthy of looking over and should be used in analyzing your current marketing situation:

Soybean Historical Price Charts

2004 – 2014

2014 – 2021

 

Corn Historical Price Charts

2005 – 2013

2015 – 2021

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