Near-Record Commodity Prices Greet South American Farmers

November 17, 2016 12:00 PM
Near-Record Commodity Prices Greet South American Farmers

Record or near-record commodity prices are benefiting farmers in Brazil and Argentina just as South America prepares for blockbuster production of new-crop corn and soybeans, says Jarod Creed, senior director of customer risk management for Gavilon Producer Solutions, a division of The Gavilon Group. Those advantages will make it more difficult for U.S. producers to find a home for their own big crops.

“We’re expecting roughly 30 million metric tons more corn out of South America than last year, roughly 7 million metric tons more soybeans,” Creed tells “AgDay” host Clinton Griffiths on the Agribusiness Update segment for Thursday, Nov. 17, 2016. “Soybeans are probably the biggest story right now between Argentina and Brazil. We’re looking to have roughly 160 million ton crop. Given that they meet those numbers, the issue it brings back to the U.S. is competition within world grain trade.”

Commodities in South America already are trading at a 40- to 50-cent discount to commodities in the U.S., Creed points out, and record planting progress is happening for the new crop.

“The real has drastically weakened over the last 48 hours, giving the South American farmer near or record prices,” Creed says. “So as the farmer continues to sell into these record prices, it puts potential pressure on their domestic market, and long-term all that does is make their product cheaper to the rest of the world.”

Back in the U.S., Creed recommends row-crop producers take a couple of different steps.

“Look at old-crop soybeans. I think right now for most it’s just yield times price. Make sure that revenue per acre is profitable this year,” he says. “[For] 2017, it’s all about making a plan right now and making sure we execute that plan when further volatility comes along.”

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