Farmers Need Strong Crop Demand, Post-Harvest Rally

September 22, 2016 02:50 PM
 
 

Most farmers have started in the field, and are seeing mixed results. Crops have been impacted by disease, heat, and recent flooding to name a few. Other places are having better luck, seeing record yields in their fields. 

As for the markets, they aren’t doing too hot either. However, these cheap prices could be it’s own cure. The government is expecting a good demand.

“Cheap prices will drive the end user to it, and that’s all we want to see for our producers,” said Jim McCormick of Allendale, Inc. on AgDay. “You’ll see the market lift itself up as it tries to get excited about the demand prospects out there.”

But where will that demand for products come from? 

For soybeans, McCormick believes it will be China. With a population of more than 1.3 billion, that’s a lot of people to feed. On U.S. Farm Report, McCormick mentioned China’s hog population totals the next 50 countries combined. Those hogs have to eat, and one of the ways is with U.S. soybeans.

While U.S. corn prices aren’t the highest, the low prices has a good advantage in the global marketplace. Competitive corn exports can help with the large stockpile of old crop while the new crop comes is harvested.

Domestically, the livestock sector can benefit from low corn prices, but not for long. Feeding animals longer results in heavier weights, and as McCormick calls it, “a double-edged sword.” Overfeeding hurts livestock prices, but consumers can utilize the product.

Converting surplus corn to ethanol may sound like a good idea, but it doesn’t work that way. Right now, new ethanol plants aren’t being built, and that causes issues.

“The problem for ethanol is we’ve pretty much maxed out our capacity,” said McCormick. “We can export more, but the efficiencies is where it’s at.”

As farmers start harvesting, they need to make a grain plan. Whether they choose to store it on their farm, a commercial operation, or move it, McCormick feels they need an opportunity to “reown it” for the hopes of a post-harvest rally. 

“Somewhere down the line we will get a nice post seasonal rally,” said McCormick. 

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