Like Paul Simon’s song, “One man’s ceiling is another man’s floor,” food processors are feeling the brunt of higher commodity prices, but farmers are seeing an opportunity with the higher prices. In addition, new technologies are making it possible to consider new land for farming that wasn’t worth planting a few years ago, potentially increasing yields and possibly lowering prices.
If you ask someone who supplies equipment to farmers and is close to what’s going on with agriculture, the story goes beyond just supply chain issues and fuel/fertilizer cost issues.
Mory Taylor, chairman of the board of Titan International (TWI), a supplier of farm equipment tires and wheels, provides an optimistic outlook for farmers, suggesting that this year could be one of the best for farmers, notwithstanding weather/climate issues that could harm crops.
According to Taylor, the USDA recently published data that predicted a record number of acres will be planted in 2022. “I’ve spoken to a couple very large equipment dealers, that are also larger farmers, and they have noted that there is a lot of marginal land that with new seeds and fertilizer can now be profitable. If you look at the current corn prices around $6, soybeans near $14, wheat above $7, and cotton at $1.15—American farmers are going to be working hard and planting in a big way.”
While orders for farm equipment are nearly booked full for 2022, Taylor says another driving factor for higher commodity prices is: even if farmers have a record harvest in 2022, the overall inventory of grains will still be on the low side. “If a farmer cannot make a profit in these markets, then they should find a different career.”
Ups and downs for farmers and the food industry
While some food industry market studies have pointed out several downside risks for the food industry, Taylor still sees high points for the food industry—and all the suppliers that directly or indirectly contribute to food industry inputs.
“The U.S. equity markets have been all over the place and TWI has experienced this as well,” says Taylor. “I believe any business that is involved in the production of food in the U.S. is likely going to see new highs in their business. This should include equipment manufacturing, suppliers, farmers, and dealers. All you need to do is look at the current prices of corn, soybeans, cotton, wheat—to see that virtually everything to do with farming is on a good path and going higher.”
Farming smarter can help increase yields, lower input prices to processors
USDA Secretary Vilsack highlights the new Partnerships for Climate-Smart Commodities opportunity released on February 7, 2022 while speaking at Lincoln University. Photo courtesy USDA
USDA Secretary Tom Vilsack recently announced a new $1 billion investment in partnerships that support climate-smart farming, ranching and forestry practices. This investment can help create climate-smart commodities that have a competitive edge to imports.
Through the Partnerships for Climate-Smart Commodities program, USDA will finance partnerships to support the production and marketing of climate-smart commodities via a set of pilot projects lasting one to five years. Pilots will provide technical and financial assistance to producers who implement climate-smart practices on a voluntary basis on working lands; pilot innovative and cost-effective methods for quantification, monitoring, reporting and verification of greenhouse gas benefits; and market the resulting climate-smart commodities.
In a recent FE story, the National Association of State Departments of Agriculture (NASDA) are emphasizing voluntary and incentive-based climate-smart agricultural programs.
“ASA [American Soybean Association] appreciates USDA announcement of the new Partnerships for Climate-Smart Commodities initiative, which we hope will help soy farmers throughout the country and the agricultural value chain to address climate change” says Brad Doyle, ASA president and Arkansas soy grower.
“America’s soybean farmers welcome opportunities to grow sustainable markets for their crops, including as food, feed, biofuels, and other biobased goods, and through export programs like the Soy Sustainability Assurance Protocol,” says Doyle. “Unlocking a new climate-smart commodity marketplace is a positive next step for our industry, and we are pleased to see what innovations this pilot program delivers.”