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Allianz chief economic adviser Mohamed El-Erian says if you look at the market it’s the best of times, but the global economy seems to be losing momentum as the recovery begins. He later talks about the importance of a Phase Four stimulus bill and reacts to Federal Reserve policies.
After a growing season last year filled with heavy rains and bitter trade wars, American farmers were hoping 2020 would give them an opportunity to catch up. Instead, the situation worsened for many, with prices remaining depressed.
Despite a windstorm that ravaged Midwestern farms last week and drought conditions in remote areas, a bumper corn and soybean crop is still expected this year.
“Overall, the trade seems to be coming to the conclusion that … there will always be an oversupply of corn in the United States and around the world,” said Tomm Pfitzenmaier, analyst at Des Moines, Summit Commodity Brokerage, based in Iowa. , in a research note Friday.
That case was reinforced on Friday when Pro Farmer, after a week-long tour of farmland in seven states, estimated the national corn yield at 177.5 bushels per acre and the national soybean yield at 52.5. That’s slightly lower than previous estimates from the US Department of Agriculture, but higher than the waterlogged harvest of 2019.
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For many American farmers, the prospect of grain prices remaining low is untenable. “It’s almost a daily struggle to decide what to do next year,” said Doug Sombke, president of the South Dakota Farmers Union and a farmer of 3,000 acres of corn and soybeans in Brown County, SD.
Mr. Sombke says his local grain elevator pays $ 2.87 for a bushel of corn. That’s almost a dollar less than he would need to raise to break even. The same goes for its soybeans, for which the elevator is willing to pay around $ 8.50 a bushel.
Corn and soybean prices have not risen since the start of the year, when the US-China phase one trade deal signed that said China would buy $ 36.5 billion of agricultural products in the United States gave farmers hope that China’s export demand would. price of buoys. Instead, the busiest corn futures at the Chicago Board of Trade are down 16% year-to-date, while wheat has fallen nearly 6% and soy has lost nearly by 5%.
Chinese exports of US corn, soybeans and wheat are 144% higher than they were at this point last year, according to data from the USDA’s Foreign Agricultural Service. But the onset of the coronavirus pandemic in the United States in March hampered domestic demand for grain as restaurants and other institutions across the country closed.
Soybeans are unloaded from a combine during harvest in Brownsburg, India (AP Photo / Michael Conroy, File)
Iowa farmers assess losses after flattened corn fields
If the situation does not improve quickly, Mr Sombke said he may be forced to quit farming. “We have choices to make,” he says. “Over the past three years, we’ve lost equity on our farm. Do we want to continue doing this?
Bankruptcies are numerous in agricultural countries. According to federal data, approximately 580 farmers filed for Chapter 12 bankruptcy protection in the year ended June 30. More recent data from the Federal Reserve Bank of Kansas City shows that farm loan repayments are expected to drop precipitously over the next three months.
“We entered Covid with many operations in distress,” said Brian Philpot, CEO of AgAmerica Lending, based in Lakeland, Florida. Most of the reported bankruptcies are on small family farms, while larger farms take the opportunity to buy land from struggling farmers, Philpot said.
“The big producers are doing well and they are acquiring,” Philpot said.
Winter wheat is harvested near McCracken, Kan. (AP Photo / Charlie Riedel, file)
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Government assistance in the form of USDA assistance and the $ 19 billion coronavirus food assistance program has helped mitigate financial damage from low commodity prices, but farmers say that it is only a bandage.
“In the agricultural economy, we really appreciate the help we’ve received from the federal government,” said Richard Guebert Jr., president of the Illinois Farm Bureau and a corn, soybean and wheat producer in Southeastern. Illinois. “But we really want to get our income from the market.”
While the weather in the Midwest has been more favorable to growing a strong crop than last year, this year’s growing season has not been without weather issues.
Seth James cleans up fallen tree branches after high winds and heavy rain passed through the area Aug. 10 in Davenport, Iowa. (Kevin E. Schmidt / Quad City Times via AP)
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Earlier this month, a powerful storm carrying winds of over 100 miles per hour swept through much of the Cornbelt, causing widespread property and agricultural damage. The wind ripped a lot of the Iowan’s corn from its stalks and destroyed grain bins that held corn farmers who were saving up to sell them once prices went up.
Farmers affected by the storm are now in a rush to harvest and store the corn before it rots. “They had a really good harvest before the windstorm,” said Brian Grete, editor at Pro Farmer who was leading the eastern portion of the crop tour. “Now it’s a race to see how many they can fit in the trash before they run out of time.”
When grain prices are low, farmers often try to grow larger crops to sell more and cover costs. “If you have low commodity prices and low yields, it’s extremely difficult,” Guebert said.
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