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IKAR in Mass Media

Ag economists optimistic on US competitiveness; bearish on market

17 сентября 2014 года

Around 55 agricultural economists from more than 30 countries met in Des Moines at the annual agri benchmark Cash Crop conference to discuss the state of global crop production and its perspectives. While cash crop farming was still rather profitable in 2013 in most parts of the world the experts are more bearish regarding the future commodity prices.

According to Yelto Zimmer (Thünen Institute), coordinator of the network, the agri benchmark typical farm data shows only little evidence that long term commodity prices could stay as high as they were in recent years contrary to what major international research institutes project. 2013 figures already indicate that U.S. and Brazilian corn producers started to feel the economic pressure. Meanwhile, corn prices have gone down even further, making the economics for the 2014 crop look rather bad. Given the strong interaction between the different agricultural commodity markets it’s only a matter of time until other crop markets decrease as well. In the long run, the value of the energy content of crops – the so-called bushel-barrel correlation – will lead to a floor price. Current figures presented by Bob Wisner (retired ISU economist) indicate that this price could be in the range of 120 to 140 USD/metric ton or $3 to $3.50 USD/bushel as long as crude oil is traded at 100 USD/barrel. However, the present high profitability of oilseed and protein plants is remarkable. Although the competitive advantage, of e.g. rapeseed versus wheat, varies between farms, the rapeseed production is profitable in most farms that were analyzed by agri benchmark.

Kelvin Leibold (Iowa State University and host of this year’s meeting) stated: “Compared to our major competitors in global corn and soybean markets, producers in the Midwest enjoy the strong benefit of highly competitive transport systems.” Furthermore, their production systems tend to be rather competitive as well. Since the US farmers have been paying rather high land rents this could be a significant buffer for even lower prices. Kelvin Leibold underlined: “This is an advantage that many others don’t have.”

When talking about the political crisis in Eastern Europe, the Russian agri benchmark partner Dmitri Rylko (Institute for Agricultural Market Studies – IKAR) mentioned that the conflict will have a mixed impact on domestic agricultural producers with no clear resultant vector yet: sanctions will make it harder and more expensive to finance investments and current assets. On the other hand, livestock and some other sectors may benefit – both because of increasing domestic prices as well as through increasing subsidies which will be paid to speed up import substitution.

Source: Agprofessional.com  |   |  Comments: 0   Views: 46

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