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Feedstuffs is the news source for animal agriculture
February 22, 2022
Anyone not feeling stressed out about today’s world is most likely not paying any attention to what’s going on. Here are a few thoughts on what’s impacting the livestock industry:
Inflation is at the highest level since the early 1980s, impacting food prices, labor costs, and almost everything the industry purchases.
Labor shortages in the livestock industry are a challenge for both producers and processors. Managing labor is most likely the biggest challenge facing the industry.
Steel prices have been on a roller coaster ride. Last year, equipment manufacturers were faced with steel shortages and skyrocketing prices. Now the trend has reversed with steel prices dropping sharply over the last two months. Many manufacturers are stuck holding inventory at high price levels above where the market is now trading. In manufacturing industries, it is frequently more challenging for management during falling markets than during higher markets.
The South American drought has been headline news for the last two months. Now entering the end of the production cycle, this will become a less dominant feature that has still certainly had a major impact on soybeans, soybean meal, and soybean oil prices.
The Ukrainian/Russian conflict is having a very substantial impact on prices. Ukraine accounted for 13% of the world’s corn exports last year, and Russia and Ukraine combined accounted for 28% of the world’s wheat exports.
Bull markets in corn and soybeans will result in strong competition for planted acreage this spring. There just aren’t enough acres to go around. It should come as no surprise to anyone that soybean acres are going to be up and corn acres down. The question is, by how much?
The pork industry is being challenged with a new strain of PRRS (porcine reproductive and respiratory syndrome). Estimated production losses in Minnesota are about 6%. This could take two years for a complete recovery.
These are just a few of the highlights. At some point, and probably soon, the corn and soybean markets will act like the steel market, going from a major bull to a major bear. Commodity funds hold the vast majority of long positions in both markets. Commercials hold the vast portion of the short position. It’s like a rubber band ready to pop. When the trend turns it will do so abruptly and will likely do so before planters start to roll. The market is going to be extremely volatile over the next couple of months.
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