Despite a couple down days in the commodity markets to end the week, core commodity prices were on a solid run in the past couple of weeks. And as a bull market continues to take shape, there are a few key factors in the driver’s seat.
“It’s finally friendly again for all commodities,” says Naomi Blohm of Total Farm Marketing by Stewart-Peterson. “You have low ending stocks for the grain markets, you have high demand for hogs and for beef right now. So, it’s a friendly commodity story. And a lot of people around the world just want to be part of it.”
As the strong demand story continues to headline the commodity markets, Mark Schweitzer, vice president of global economic research for ADM says there are several catalysts going on.
“On a global perspective, ocean freight is off its lows and reaching highs, silver, copper, iron; you look at all the commodities around the world, it’s pretty amazing,” says Schweitzer. “The term ‘commodity super cycle’ is starting to circle around again, but I think it’s a little early to start that conversation. But certainly, when you start to look at the commodities in the baskets on a global basis, there’s no question that there’s concern around inflationary measures and where to get investment returns in a zero-interest rate world, and commodities are giving that.”
Higher prices are also hitting more than just corn and soybeans. Cotton, rice and specialty crops are also experiencing higher prices as the intense competition for U.S. acres heats up. And Blohm says that’s a factor that could help prices heading into planting.
“There is continued acreage battle going on looking at the states in the Northern Plains,” says Blohm. “Now you even have this competition from Canada, as the canola prices in Canada are so high right now, we’re going to maybe see more acres going for canola in places like North Dakota now. So, are they also tempted to be planting canola and soybeans? Because there’s so much demand for just the vegetable oils in general.”
Blohm says spring wheat prices are also fighting for acres as prices improve.
“So, we want to make sure that the demand can stay strong, and prices stay firm and the acreage battle is not over yet,” she says.
Even with a projected increase in acres, Schweitzer says the strong demand may not fully be realized in USDA’s balance sheets yet.
“We [ADM] do believe that the demand is a little stronger than what USDA has penciled in their balance sheet,” he says. “Probably more so on the feed grain side, but certainly in oil seeds. Also, when you look at inspections, and weekly export sales, you know, we’re already at 98% - when you combine the two together - 98% of the USDA commitment on bean exports, and its 89.3% on inspections and sales on corn. We still have half of marketing here yet to go. So, I do feel that USDA is probably a little light on their numbers.”
Can these strong commodity prices last? Listen to the full U.S. Farm Report marketing discussion as Schweitzer and Bohm talk about the possibility for prices.
