Current crop prices and farm returns may be weak but there will still be rallies and selling opportunities in the days and months ahead that producers must be ready to cash in on, an analyst says.
Ben Buckner, chief grains analyst for AgResource Co., said at the Ontario Agricultural Conference earlier this month that such factors as the weather could come into play to lift crop markets out of the doldrums. The key for farmers, he said, will be recognizing and jumping on those rallies.
“I don’t think the markets will be without opportunities,” he told the crowd. “But as your neighbours may start to see rising prices, thinking this is maybe the start of a long-term, sustained bull trend, I want you. . . to sell those rallies.”
A weather problem somewhere in a major global production region will often spark a rally in the markets, and Buckner said those instances are becoming increasingly common. Prior to about 2017, it was only about once every 10 or 12 years there was a major drought in one of those regions, including the US. Since 2017, however, Buckner said world crop productivity has basically flatlined, something he largely attributed to weather calamities.
“We cannot get everyone to grow good yields together,” he said. “When you’ve got really good yields in Canada, you have poor yields in Australia. When you have solid yields in Russia, you lose yield in the US.”
There will be times when all the world’s production regions harvest strong crops at the same time, but those times are becoming less and less frequent, opening the door to possible rallies, he said.
Just two years ago, Buckner said, drought coverage across the US was record high as of the end of June. The American corn crop was just another couple of weeks away from taking a major yield hit before a pattern change brought moisture just in the nick of time. The rain quashed what might have been a significant price rally, but it shows just how razor thin the margin for error can be.
Looking ahead, Buckner said the 2025 growing season is likely to get off to drier start in parts of the US, as well as the portions of the Canadian Prairies.
Buckner said it also appears farmers have pushed yields to their upper limit. Due to greater investment, technology, and management, global yields for major crops – corn, soybeans, wheat, barley, sorghum, and canola - expanded by 16% between 2010 and 2016. But since 2016, major crop yields have only ticked higher by 3%.
With yield growth seemingly stalled, Buckner said additional farmland isn’t coming to the rescue. In fact, not only is there not any major new farmland coming into production – outside of some upside potential in Brazil - Buckner said the world’s farmland is now contracting, at least partially due to the war in Ukraine.
Add it all up, and Buckner said there are reasons to believe prices can and will move higher at times, within the current context of overall bearishness.
“Supply loss, I think, will be more frequent over the next decade,” he said.
