It’s typically difficult to predict what the future may hold for American agriculture, and 2022 is no different. Ben Brown is a senior research associate in agricultural and applied economics with the University of Missouri. He says farmers have reasons to be optimistic in the new year.
“There’s great optimism on the output side. This has been a very solid year in summer and winter for outputs of grain crops, all the way from corn, soybeans, wheat, cotton, spring wheat, sorghum, we’ve had opportunities to sell it at profitable prices. The fact that we’ve seen soybean rallies of 20 cents or greater even when above $13 is kind of exciting for people to look at. Certainly, we’ve seen cotton have some amazing price potential. Spring wheat is going to get chances to be profitable, and I certainly expect to see more spring wheat acres just given how dry it was there last year and the basis potential for quality wheat this year. And we’ve had chances to sell winter wheat in the eight dollar-range, mid-to-low eight dollars, at different times this winter.
Livestock producers, especially those who raise beef cattle, also have reasons for optimism.
“On the cattle side, especially in livestock and cattle, it’s been supportive. We have great demand, incredible demand, both domestically and internationally for beef products, but then we’ve got some supply-side fundamentals that are also supportive. The herd is declining, we’re slaughtering at very high rates, it’s one of those things that even though you hear reports of meat shortages at grocery stores, it’s not a factor of market-ready cattle not being available or slaughtering plants not slaughtering at full capacity. We’ve been slaughtering at rates we haven’t seen in a long time on the cattle side, and those facilities are working just as hard as they can. The reason we’re seeing shortages is just that we’ve had such amazing domestic demand even at higher prices.”
Brown says the pessimism in 2022 is coming from the input side of the equation.
“However, as I’ve talked with many producers, you look at the finances and you do the breakdown in the budgeting and everything, and there’s likely going to be very good cash receipts both in livestock and crops across the board even with higher input prices, especially if you use the risk manager right now. My concern is that people don’t do risk management and prices fall as we work our way through the calendar year and supply kind of builds back up a little bit, and we’re still stuck with what we call slow or sticky cost side. Costs are slow to come down. But right now, if you look at these prices, prices for the output are keeping up with the input costs across the board for most products, and so, it’s a rather optimistic picture. Farmers would love to have the output prices that we’re seeing without the high input prices, and it’s just been a function of as sure as the sun rises in the east, as output prices go up, so do input prices.”
He says both farmers and extension colleagues in other states have talked about the potential of farmers changing their planting intentions because of high input costs. Brown says there will likely be some acres switching, but it might not be that big of a number.
“There’s maybe not as much consideration about switching crops because the finances, even with high fertilizer prices, have helped to be profitable, or the returns per land between corn and soybeans just aren’t that much different to switch. But there are certain areas of this country, Missouri is one of them, where you can get a pretty consistent soybean crop, from somewhere around 45 to 50 bushels per acre, year in and year out, on soybeans. But you don’t even have to have a dry year or excess rainfall to have huge variability in corn. And so, it’s states like Missouri, and I’m gonna throw Ohio into this as well because I worked in Ohio and I know several folks out there, there are pockets in Ohio where soybeans continuously outperformed corn, so, in those areas, I do expect some shifts from corn to soybeans because they’re sitting there going I don’t want to risk this high operating costs with the chance of having a low corn yield.”