Intensifying Threat of a Government Shutdown is Now Another Blow to Grain Prices
U.S. Farm Report 09/30/23 - Roundtable 1
As Congress drew closer to a government shutdown this week, the news pressured commodity prices. The drop in commodity prices happened despite what some viewed as a slightly bullish September Grains Stocks report for corn.
Brad Lubben, extension agricultural and public policy specialist with the University of Nebraska-Lincoln, says even if a last minute-deal happens, there’s still costs associated with a possible shutdown situation.
“If you're in a government agency, you’re already making plans [for a shutdown],” says Lubben “They're already making plans about how to deal with a shutdown, who goes home, who stays as an essential worker. There are already costs associated with making those plans, even if we come up with a last-minute compromise. We're heading to a little bit of a shift and a little bit of a challenge in terms of some costs and some repercussions.”
Not only does the September 30 deadline apply to keeping the government open, but it’s also when the current farm bill expires.
“The farm bill is taking a backseat to the appropriations process, at this point,” Lubben explains. “When we get back to a debate on a farm bill, we still have the same challenges we have to deal with. How do you put a farm bill together that increases some support levels, as certain members of Congress and many ag groups are asking, but also sticks within a budget constraint that we're faced with at the moment that is largely driven by a very large food assistance component, and commodity crop insurance and conservation titles as well?”
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With an extension likely, he says there’s not a lot of urgency to finish a Farm Bill at the moment, which could create a longer time-line for getting one done.
“And part of that may be because we have prices at a level where we haven't had to rely on some of those programs as much,” says Lubben.
While commodity prices are still better than the last time a farm bill was written, commodity prices have been in a downward slope this fall. And Friday was no different. Economists say concerns over a shutdown added to the price pressure on Friday.
“From last spring to now we're running about 20% off, that's just on futures side,” says Cory Walters, an assistant professor in ag econ at the University of Nebraska. “And then with the current river conditions, basis is also off quite a bit.”
Walters fears that with price pressure, and eroding basis, farmers may face tight margins into 2024, a different scenario that farmers saw during the fall of 2022.
“This s revealing that the act of management, and the importance of being strategic and looking forward. Don't just wait until fall to make your marketing decisions. There's a lot of money really floating around on this table, and waiting can put us in a bad financial spot real quickly."