Chinese demand and Iowa storm help farm prices rally
MINNEAPOLIS — Things are looking up for farmers as harvest gets underway — at least for those outside the areas hit by a severe storm called a derecho in early August — thanks to a mix of increased demand from China and the misfortune of farmers in other states.
Corn and soybean prices are both up by about a fifth since early August and the hog rally has been even more pronounced.
“These prices, with these yields, should make things look financially much better than they did back during the summer, because it looked kind of bleak, really,” said Rick Anderson, risk manager for Goodhue-based Ag Partners, which operates several grain elevators in Minnesota and Wisconsin. “When you combine that with some of the government aid that they’ve received and are projected to receive, that will help of course, too.”
The biggest reason corn and soybean prices have rallied is that China is purchasing more of them from the U.S. in recent weeks.
“Their economy is rebounding from the pandemic is what we’re told, and more importantly their swine herd is rebounding from the African swine fever,” Anderson said.
Chinese demand for soybeans, in large part to feed hogs, makes the country the largest customer of U.S. soybean producers.
Minnesota’s corn and soybean crops are also well ahead of last year, and many farmers expect good yields.
Meanwhile, many farms in Iowa were hit by drought and the derecho that flattened fields from Fort Dodge to Cedar Rapids.
“The derecho that moved across a big swath of Iowa, that kind of grabbed everyone’s attention,” Anderson said. “What we thought was going to be a really big crop has gotten smaller.”
In another bright spot for farmers, President Donald Trump announced last week that the federal government will spend another $13 billion on assistance to farms, in addition to the $19 billion in coronavirus relief announced in April.
Bryan Klabunde, who raises corn and soybeans near Waubun, Minnesota, said the price rallies offer a muchneeded morale boost.
“Harvest is full speed ahead right now and it’s been a while since we’ve had any market movement in a positive direction,” Klabunde said. “It’s nice to see. It’s a positive thing that we needed.”
Farmers need to use the rally to lock in prices, Klabunde said, and not get too mesmerized with the idea that prices will continue to rise. Waiting for prices to keep rising could end up biting them, he said.
And corn prices are still hovering near or below breakeven prices for many farmers.
“If farmers take advantage of the rally, that’s a good thing. And hopefully we do,” Klabunde said. “It’s not a life-changing rally. It’s not a pay-back-all-the-bills rally. It’s a rally to get markets back to what should have been a basic bottom for the last 12 months.”