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RaboResearch: Pressure on crop prices to remain

Trade dispute with China and African swine fever weigh down soybean price.

In its new series of 10-year outlooks for corn, soybeans and wheat, the RaboResearch Food & Agribusiness group at Rabo AgriFinance underlined continuing long-term challenges for U.S. producers. Ending stocks will continue to be an issue for the crops, according to the outlooks, as the long-term trends for yield increases make up the difference in lower acreage numbers while demand remains flat. These stocks will keep a lid on commodity prices.

“The current challenges to profitability will likely and unfortunately continue for row crop producers. U.S. farmers will need to look at being low-cost producers if their long-term plans include growing any of these crops,” said lead author Stephen Nicholson, senior grain and oilseed analyst with Rabo AgriFinance. “Crop diversity will continue to be a good strategy for capturing any upside activity in prices and keeping cost of production down, and opportunities for specialty premiums such as food-grade, high-premium wheat or organic grain will continue to be attractive for increasing revenues.”

A major supply shock -- from another major weather year, for example -- could cause large price and acreage reactions. Those reactions would likely last only a year or two before acres and prices return to trend. 

Regarding soybeans, Nicholson said out of all the crops, the trade war with China “has had the largest impact on soybean prices. The trade war alone has reduced the average national price paid to soybean farmers by $1.00-1.50/bu." Global outbreaks of African swine fever (ASF) have added another 50 cents to $1 to the reduction, he noted.

Even if the U.S. and Chinese governments resolve their trade dispute, RaboResearch expects demand to drag due to the lingering effects of ASF, namely slow or limited sow herd rebuilding in China and Southeast Asia. Should the number of barge loads of soybeans to China continue to go adrift over the next decade, the RaboResearch analysis showed a 75% probability that farm-gate soybean prices will remain under $9.60/bu.

The trade war with China and ASF do not have a major effect on the corn and wheat outlooks; instead, “oversupply, flat domestic use, no or little growth in exports and increased global trade competition” will pile up, according to the RaboResearch reports.

Given no changes to ethanol policy, the outlooks call for animal feed to overtake ethanol as the demand driver for corn in 2026-27.

“Corn farmers could expect local markets -- for example, large livestock operations -- to become their better pricing opportunity versus the export market,” Nicholson explained.

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