USA Farm Projections
Tommy Grisafi, a Chicago Board of Trade stock broker discussed grain markets recently. Grisafi says farmers should watch seven things this year when pricing crops. First, watch China and the trade tariffs. A federal judge ruled that all tariff money collected had to be paid back but that could take years of litigation. Second, is the weather in South America. Watch for an indication or scare of a South American drought which could push crop prices up short term. Drought scares are an opportunity to sell. The same goes for USA drought which are more common and are still lingering throughout the country.
Third, watch the corn export demand which has been higher. Grisafi says to market your crops when you can lock in a profit and do not wait too long. Fourth, get crop insurance. With todays high crop inputs for fertilizer (20-25% higher), machinery (25-40% higher), pesticides, and Labor; farmers are in a squeeze between lower crop prices and higher input costs.
Fourth, watch your acres mix between corn and soybeans. Grisafi expects more soybeans planted this year due to 20-25% higher fertilizer costs. Last year, the corn/soybean ratio slightly favored planting more corn acres in the Midwest. The problem was that most Midwest farmers who did that, forgot to sell their crop or lock in a profit. Now they have corn to sell yet. Perhaps with the Iran war, they can sell now or should sell now or soon.
Fifth, last year Texas, The Dakotas, Wisconsin, and Canada had higher than normal corn crop yields due to favorable weather for them. With recent crop price increases, now is a good time to look at selling old crop inventories. Sixth, storing a crop is not risk free. Grisafi says sell corn and own corn by buying call options. Buy the call options on your first sale of the crop. Then do not second guess yourself. Finally, the big news is the IRAN war which is expected to last 4-5 weeks. If it lasts longer that can be a problem. But most likely this is a short-term selling opportunity.
Jim Wiesemeyer (wiesemeyer@gmail.com) a Washington DC agricultural insider from Virginia also spoke about US agriculture. Jim has free daily report, just email him for free daily insights. Jim expects the Iran war to cost the USA about 1.5 trillion dollars. The economy is good but our national debt has climbed from 18-20 trillion in 2020 (before COVID) to about 37 Trillion and climbing today. That has put a lot of money in peoples pocket but has also cause higher inflation (peaked at 9%).
In the USA, grain producers are losing money along with sugar beet producers ($300-$800/A), rice ($200/Acre) and sugar cane. Livestock markets are good especially for cattle and hogs. USA Agriculture is in a Depression but not as bad as the 1980’s (high inflation, low prices). The price squeeze is real for USA farmers. Land prices remain high as a source of bank assets, but if that declines expect widespread farm sales. Unfortunately, there are many rich traders, doctors, layers etc. waiting for that to happen. We could see significant shifts in farm land ownership from farmers to investors if that happens.
AI is impacting agriculture in a big way. AI is producing smarter and faster robots and it is just beginning. AI generated robots can pick strawberries faster and more efficient than humans, leading to a 10-12% productivity gain. AI is helping select better genes within a plant genome, leading to faster and higher crop yield gains. If you take a picture of your crop, it can tell you the growth stage, nutrient deficiencies, and diseases and then recommend solutions (sprays, crop management) to fix that problem immediately. AI is also helping with AG labor shortages.
On foreign policy, Jim says Trump Tariffs are risky for farmers however; they are long overdue. The bad news is the short-term pain from tariffs to AG. China has stopped buying our treasuries and has invested money in South America, especially grain terminals and infrastructure; leading to them buying less soybeans. However; China cannot afford to alienate the USA, so they still buy our soybeans at a cost of $1.20/bushel more. Even Europe and most central banks are not buying our debt treasuries, so that could cause interest rates to rise long-term. China and Europe seem to be intent on buying gold to dethrone the USA dollar. China has a problem though, their economy is only growing at 5% compared to 10-15% a few years ago; so they are having troubles also. All these factors affect our grain prices, and it can be difficult to sort out.
