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TIMELY TOPICS
The last time I visited the topic of commodity prices, the world agricultural economy was grappling with the Russian invasion of Ukraine and the host of uncertainties that event introduced into grain and fertilizer markets. At that time, prices for corn delivered to the Shenandoah Valley peaked at over $8 per bushel.
Last week, the USDA issued its latest estimates of planted acreage of major commodities from corn to cotton and it indicated there were around 91.3 million acres of corn planted in the U.S. this spring. That estimate is about a million acres more than pre-report estimates suggested and additional surveys and estimates by USDA indicate farmers are holding significantly more grain in storage than the previous year. All this points to a significantly larger U.S. supply of corn and other grains than in previous years and prices have fallen. The current price for corn delivered to the Shenandoah Valley is well under $5 per bushel.
Corn prices in the Shenandoah Valley are typically 50 cents to 85 cents per bushel above prices in the Corn Belt States because our poultry and livestock farms use a great deal more corn than Virginia can grow and it therefore has to be transported in by rail and truck. Prices for corn in the Corn Belt States are now well below $4.25 a bushel.
How did we get to this place in the markets when just a couple years ago I discussed fears of starvation and skyrocketing grain prices as a result of Russia’s invasion of Ukraine?
The answers are several. First, thanks to international diplomacy and some regional tactical successes by Ukraine against the Russian navy, Ukrainian grain has managed to find a route out of the Black Sea by transport ships hugging the shores of the western Black Sea.
Second, Brazil and to a lesser extent Argentina have been investing in transport infrastructure in recent years, allowing these countries to successfully market and store larger crops of soybeans and corn. It is worth noting that a significant portion of this investment in grain handling infrastructure and road improvements in Brazil have come direct from China.
Third, on-going trade disputes between the U.S. and China have both sides imposing high tariffs on products and as a result U.S. grains are effectively more expensive than the same grains from South America. China now buys significantly more feed grains from Brazil and Argentina than it did 10 years ago.
What does this mean for Rockbridge? In general, since our commercial farms are primarily corn-users and not so much corn producers, low grain prices are good for our regional agricultural economy. However, we have some farming operations, both part-time and full time, that rely on income from the sale of corn, soybeans, and wheat. These local farms now face the double jeopardy of low prices and low yields due to emerging drought conditions.
In the Rockbridge region, our poultry, dairy and beef cattle operations face generally favorable market conditions thanks in part to lower corn prices. But drought conditions locally could wipe out any gains. Our beef and dairy operations are heavily dependent on our capacity to inexpensively produce pasture, hay, and corn silage (the chopped stalk, leaves, and grain stored in silos for cows to eat). These are fibrous and bulky animal feeds that cannot be hauled-in as easily as more nutrient-dense corn and soybean meal.
These are not new challenges for farmers in Rockbridge but they shape the decisions farmers make and impact the capacity of our farmers to invest in longterm stewardship.
