Looking forward

March 24, 2022 | Kriss Nelson

Market trends, input costs, the Ukraine-Russia war, and what those mean for crop and livestock prices were discussed during an agricultural outlook panel discussion during the Commodity Classic on Friday.

Seth Meyer, chief economist for the U.S. Department of Agriculture; Scott Gerlt, economist for the American Soybean Association and Erin Borror, economist for the U.S. Meat Export Federation (USMEF), spoke on behalf of their organizations. Mac Marshall, vice president of market intelligence for the United Soybean Board and the American Soybean Association served as moderator.

 Following the presentations, Marshall took to the audience for questions.

Q: What is the outlook for how long we will see the extended inflation of input costs persisting?

A: Meyer says there is no solid answer as to when fertilizer prices will peak.

“I think it is something we are going to have to watch for the fall application of 2022,” he says. “I may have been more optimistic for 2022 months ago, but I think we have added a tremendous amount of uncertainty when it comes to fertilizer. The market is saying there is a risk for the fall of 2022.”

Gerlt says it depends on what type of fertilizer producers need.

For phosphorous (P) and potassium (K), production issues due to various reasons may cause prices for those products to remain higher while nitrogen could relax.

“For P and K, those longer-term issues will play out for a while,” says Gerlt. “I think nitrogen can come down a little sooner than others, but I don’t expect for this planting season there is going to be any relief.”

Q: What are some of the markets USMEF is excited for in terms of development and growth?

A: In addition to growth in Central and South America, Borror says Southeast Asia and Africa are markets U.S. producers can expect to see their products sold in the near future.

“Southeast Asia is where we hear a lot about, and that’s the case for red meat,” says Borror. “There is huge market potential there, and with the Indo-Pacific Strategy, there are hopes there can be some access gains. There are constraints in that region; only a handful of beef plants are approved for Indonesia.”

Looking further into the future, USMEF looks to Africa.

“We are investing there, trying to build a presence even before it really takes off,” Borror says. “They have already been an important market for beef variety meats.”

Q: Seeing export bans from eastern European countries such as Hungary and Romania; and as we are navigating some of the turbulence that is unfolding right now, what are we seeing in terms of expectations of additional restrictions on exports from other countries, with an emphasis on domestic production and where does the U.S. potentially play a role in that?

A: When countries throw export bans on their commodities, they are doing that to keep internal prices low for their consumers. It’s different in the U.S., Meyer says.

“Those folks in other countries are much more connected with their food,” he says. “We don’t throw export controls on our commodities. We are a good supplier. It only fuels further price spikes when folks do that. They can argue that politics are different regarding rising food prices in those countries. These countries should be discouraged from taking these activities that only spike prices further, hampering food-importing countries.”

Recently Indonesia announced palm oil producers to reallocate their supplies destined for export channels toward domestic consumption.

“Part of that is to keep cooking oil low domestically per domestic inflation,” says Marshall. “We saw some palpable responses. We saw palm oil take a run-up, and where that translates over to the U.S. is you have those oil prices move in conjunction with each other, and that means higher soybean oil prices, higher canola prices, higher rapeseed prices and sunflower as well, as all those oils come together.”

Q: How many bushels of soybeans are renewable diesel plants expected to use by 2024?

A. Gerlt says that is hard to determine.

“Soybean oil is not the only thing they can use,” Gerlt says. “It is going to be a significant share, but I do what to be clear we don’t expect it to take away from food use. We are expecting to see a lot of increase in the crush to feed renewable diesel while holding the food supply pretty steady.”       

Q: What is the official black swan? Could the drought in North America be the black swan event this summer? Or is it the Ukraine-Russia war?

A. Meyer says the market is really on edge, not only looking at the South American crop but watching U.S. production.

“The market will be laser-focused on what you all say you are going to plant, how you are getting it into the ground, how it is developing, and until we get to the point there is some reason to feel better, we will see volatility continue,” says Meyer. “We need a good crop. We are forecasting record corn and soybean crops for the coming year, under normal conditions, and the market needs it.”

Gerlt says he has seen enough once-in-a-lifetime events for 2022 and is hopeful for a turnaround in conditions.

“On the fortunate side, our yields have become resistant to the drought and other factors, but our fingers are crossed for a good growing season,” Gerlt says.

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