Ag Markets in Transition: Analyst

Agricultural markets are in transition, moving from a tight supply/strong demand scenario to one of adequate supply and reasonable demand, according to a US market analyst. 

Speaking as part of the USDA’s annual Agricultural Outlook Forum earlier this month, Consus Ag Consulting Partner Angie Setzer said the sharply weaker corn, soybean, and wheat prices being seen today are not a function of poor demand, despite the fact American exports have generally been slow. Instead, the primary reason for the lower prices is simply heavier global supplies. 

The fact of the matter is that world grain buyers are “awash” in offers, with no real shortages seen on the horizon, she said. 

“So, there’s nowhere out there right now where people are like, ‘oh crap, we might run out of wheat,’ or ‘oh no, we might run out of corn.’ No one feels like that right now, where we felt like that in a big way in 2022 for a short time. Demand, though good, is just not enough to outpace the adequate supply we’ve seen.” 

The mindset of comfortable supplies also prevails despite farmers generally being loath to open the bin doors at current prices, Setzer said. 

“Farmers are significantly long all around the world. The farmer has built extra storage space, the farmer has figured out to keep bushels out of the pipeline. There is carry in the market that is incentivizing you to keep bushels out of the pipeline. So, the farmer just isn’t selling.” 

Meanwhile, global buying habits have changed. Just like the sudden consumer run on toilet paper in the early days of the Covid 19 pandemic, Setzer said several countries scrambled to stockpile grain supplies amid the fear of worldwide shortages and sharply higher prices. 

“They were buying every chance they got,” she said. 

Now, however, with the confidence of adequate supplies, those same countries have returned to just-in-time purchasing. Not only has stockpiling become unnecessary, Setzer said those countries no longer also must face the added costs of storage or the risk of spoilage.