tractor in field, istockphoto

Farm economy set up for volatility this year

Market prices across ag sectors have experienced a recent upward turn. According to one agriculture economist, the overall U.S. ag economy should remain strong through the remainder of 2021 based upon a rebounding U.S. economy and strong export demand.

“I think it is all about protein,” said Gregg Doud, vice president of Global Situational Awareness and chief economist with Aimpoint Research. “Whether it’s beef, pork or poultry, China’s demand for animal protein is driving the bus and that leads to the need for soybeans and soybean meal around the world. Add to that higher demand for soybean oil, which, itself, points to a reviving world economy.”

Doud most recently served as chief agricultural negotiator in the Office of the U.S. Trade Representative and is one of the primary architects of the U.S.-China “Phase One” trade agreement.

“The biggest thing that has happened in the last couple of years is that China has banned the feeding of food scraps to pigs which used to be the case for half of the country’s herd,” Doud said. “That is an enormous amount of corn and soybean meal demand that we have to figure out how to account for going forward. It is a game changer.”

There are plenty of other corn and soybean producing countries that the U.S. will have to compete with for that market share, including Brazil and Argentina. Doud said it will take a farmer’s ability to understand all of the changes happening in agriculture and the global economy to take advantage of the situation.

“We are seeing substantial investments, venture capital and outside money taking an entirely new look at agriculture in so many different ways that it is just astounding,” Doud said. “Even looking at a five-year window and realizing all of these new innovations from technology in Silicon Valley to biologics in a feedlot, the changes may be actually frustrating and difficult for a lot of farmers to just keep up with.”

With global trade as his forte, Doud has a keen eye on the export markets and said the recent surge in commodity prices will lead to volatility in the near term.

“We are set up now to where if we have some sort of weather issue in the United States this summer, you better hang on to something and hang on tight,” Doud said. “This thing could really bounce around on us and there is going to be a lot of turbulence in these markets, rightfully so because we have the rope tight here from a supply and demand standpoint.”

Photo credit: istockphoto