By Tom Dayton
According to an article in the Wall Street Journal, January 23rd, things are looking up. For six years, grain prices have been so deflated from several years of bumper crops and the involvement with the Chinese in a trade war.
Many recent farm bankruptcies and wet weather too have affected the supply of grains. Now that China has finally ramped up imports of U.S. grain mainly because of the great expansion of pork production, farmers here are reaping the benefit.
Farm equipment sellers are sure to benefit as farmers purchase new tractors and combines as they anticipate the greater demand. Even genetically modified seeds that will result in increased yields has also seen an uptake of demand as farmers will attempt to squeeze as many bushels as possible out of an acre of land. Prices for farm land recently depressed have seen a rise in recent months as farmers begin to try to outbid each other for crop land.
On the other hand with produce prices higher, grocers and processors will see rising costs and squeezed profit margins and ultimately the consumer will notice the higher prices at the grocery store.
Farmers have been getting a boon with the higher grain prices but Government payments to support farmers this year has added to their optimism.
How long will the price surges last and will they go higher, remains to be seen. One thing is for sure though, it’s all about the low supply and demand!
One caveat to consider whether higher fuel prices and proposed $15.00 minimum wage will cut into the boon in farmers’ income.
A shutdown of the Xcel pipeline may raise fuel prices and cause Canada to apply tariffs on American goods sparking a trade war. All these items are unknown so it’s a “wait and see” game.