The global agricultural marketplace is evolving, and economists are predicting another “great economic reset” happening right now.
Economist Dan Basse, president of AgResource Company, says between inflation, a global pandemic, severe weather, war and limited farmland, economic competitiveness is going from global to regional. And this shift will impact agriculture in the coming year, he says.
He explains markets aren’t moving like they used to — a few cents a day. Today, corn, soybeans and milk are shifting in double digits.
“And so when we look at producer net revenue, we’re now finding that over 60 percent of that net revenue is your decisions of what you market your crops or milk in the marketplace,” Basse says. “Never before has information and markets been more important in American agriculture than they are today.”
Looking at input costs — seed, labor, feed, fuel, interest rates, fertilizer — he predicts pricing will stay high. And he suggests farmers find a partner to help them digest the volatile margins.
“Everybody has their hands in the American farmer’s pocket. And I think that trend basically continues,” Basse says. “But this gives the farmer anxiety. Understanding all this and putting it together into a plan becomes more difficult.”
Extreme weather events around the world and transportation logistic problems across the U.S. will impact farms here at home, he adds. Basse’s team is using a new word: “heatflation.” He says it describes the recent episodes of heat never seen before, which are stagnating global crop yields and driving a need for more acres.
“Our forecast is that the world needs to bring into crop production an additional 24 million acres in the next five years,” Basse says. “That’s not coming from the United States. The Black Sea is in problems. South America needs to do it, but it’s a hard ask and it’s a hard place to do that kind of acreage increase.”
He stresses that Wisconsin farmers can stay ahead of a changing marketplace and stay profitable even when the world trade pictures shifts. With the high demand for renewable diesel on the West Coast, soybean crush capacity is growing in the U.S. This means there will be a lot of soybean meal on the market that could help reduce cattle feed inputs.
In addition, beef herd numbers are on their way to record lows. Basse encourages dairy farmers to cross-breed the bottom third of their herd to beef to help bring herd numbers back and add revenue to the farm.
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