Harvesting the Headlines: Week Ending February 3
Between the 24/7 demands of running an agricultural operation and the blinding pace of our world today, there is little time to sift through all the headlines. The good news is that you no longer have to!
Our goal is to point you to some of the most important headlines in agriculture, so you can stay informed on the forces shaping your livelihoods.
To save you time, here are the week's top links and news items:
1. From FBN: How Do Interest Rates and Inflation Affect Farmland Values?
The two biggest drivers of land values are farm profits and interest rates. Despite the rise of interest rates in 2022, there has been minimal impact on land values.
This indicates how profitable the last two crop years have been for farmers, but what does the future hold?
The current rate environment suggests that further land value increases are possible. This link also outlines four separate scenarios for land values going forward.
2. Why South America Drives Winter Oilseed Markets
Reports have surfaced that Brazil and Argentina are considering the creation of a single currency, which prompted the author of this link to ask questions about the shared economic power of the South American market.
This is relevant for the ag community as 54% of the world's annual soybean production comes from South America. This compares to 30% for the United States.
The follow up question examined is the link between the global vegetable oil market and crude prices.
The positive correlation suggests sustained support for soybean prices going forward.
3. Retailers moving upstream: Is vertical integration coming, or has it already arrived?
Much ink has been spilled over the last few years regarding the Big Four packers holding 85% of the nation's beef supply.
This link uses Walmart as an example of how vertical integration might be one way to counter the influence of consolidation.
In recent years, Walmart has intentionally made efforts to secure its own beef supply by purchasing a minority stake in a packing plant in Nebraska, a boxed beef plant in Georgia and an agreement to supply fed calves for its branded beef program.
Capital expenditures (the purchase of farm equipment, vehicles, and buildings) will typically track with farm incomes.
With the rise in commodity prices in 2021 and 2022, we have seen a 33% increase in capital expenditures.
This link has a nice chart that breaks down the different categories of purchases.
This illustrates that tractors have accounted for a larger portion of purchases than in previous years. Overall, capital expenditures are less than the 2011-2013 timeframe.
5. The US Cowherd Now Has the Fewest Beef Cows Ever
Everyone expected this week's Cattle Inventory report to show historically low numbers, but few expected the published result.
As of January 2023, we have the fewest beef cows ever recorded.
This link examines the short and long-term impacts of the report. In the short-term, small supply will support prices.
Longer-term, this author is a bit more cautious.
Building the herd back to historical norms faces significant headwinds (higher interest rates, supply of pasture is down, inflation, and geopolitical events).
Get in touch
If you have any links you'd like to share or have any questions, please contact Travis Carlstrom, Sr. Ag Credit Analyst at FBN.
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