Ray Grabanski: Thanks for high prices
Grain prices have had a healthy run higher in 2010, in spite of relatively decent US yields of most crops. That has allowed farmers to have another good year in 2010, not quite as good as 2008, but profitable nonetheless.
Much of that run higher was due to production problems in other parts of the globe, with Former Soviet Union countries and European weather adverse for much of the summer, with too much rain in some areas of Europe, and too little in others (Russia, Ukraine, and Kazakhstan). This, along with aggressive fund buying, led to much higher prices in the summer of 2010, with prices reaching their peak basically at the November crop report Nov. 9. Prices have retreated since then, but there is a lot of the marketing year left.
A lot of credit for the run higher has to be given to funds, who have bought up the projected carryout many times over in the rally to date. That has pushed the prices of grains up to levels that have only been exceeded in the huge 2008 rally. Corn rallied to $6.05 this fall, soybeans to $13.50+, and wheat to $8+ futures. These are very profitable levels for US farmers, and give us a lot to be thankful for this Thanksgiving Holiday weekend.
While current prices give us a lot to be thankful for, we also have high prices going out the next few years for grains, price levels that will prove profitable not just for this year, but also for the next few years. Corn is around $5 through 2012 crop years, and soybeans are over $11 through the 2012 crop years. Wheat prices are $7-$7.50 through 2012 as well, and mean that farmers not only can be thankful for good prices for this year, but also through the next few years as well.
That's quite a change from the price levels we were looking at following our washout of prices from the financial crises of 2008/09, when prices sagged terribly following the housing crises and subsequent fallout from it.
Land prices sagged following the financial crises, but the past year has been very supportive for land values, with most cropland areas suggesting around 10% land price hikes again for the past year. These healthy gains are another reason for optimism in the ag world, as it further supports farmers balance sheets and makes the financial gains of 2010 significant indeed. When you add in the current profitability of producing grains with the gains in the asset values of agriculture, we have a truly golden period of agriculture the past 4 years.