FBN Research Issues 2023 Global Grain Outlook: 2023 Conditions Support Historically High Prices
SAN CARLOS, Calif. and CHICAGO, Jan. 12, 2023 (GLOBE NEWSWIRE) -- Farmers Business Network (FBN®), the global farmer-to-farmer AgTech platform and farmer-to-farmer network, today released FBN Research’s 2023 Global Grain Outlook, an analysis on the past decade of global trends in energy, fertilizer, land pricing, and interest rates and producers can expect in 2023.
Over the past decade, there are signs that the agricultural productivity gains are decelerating with recent data showing demand growth outstripping supply growth across coarse grain, soybeans and wheat. Fertilizer, energy, chemicals, labor, land and interest rates have all been on a steep incline. And while 2023 may bring modest pullbacks in some farm input costs, expect overall farm expenses to be on par with 2022.
“The current inflationary environment in agriculture is not likely to correct soon,” says FBN Chief Economist and Head of FBN Research Kevin McNew. “Slowing agricultural productivity gains in the past decade, when coupled with increased demand for food and bio-based energy will be a catalyst for higher grain prices, but also for land and input resources that farmers rely on.”
Grain Prices: At the start of 2023, grain prices continue to be elevated at historic highs. Since the early days of the COVID pandemic, U.S. grain markets have soared, nearly doubling in the past two years. While prices at the end of 2022 are below the highs set in the spring, conditions heading into 2023 should support, if not further elevate prices more.
Energy: Oil, natural gas and diesel prices have been trending lower since the summer of 2022, but still remain twice as high as they were in late 2020. The continued war between Russia and Ukraine, as well as the lack of long-term investment in fossil fuel energy sources should keep energy markets elevated in 2023 with limited hope of significant price declines.
Renewable Fuel V2 Wave: Data from 2021 illustrate that even though EV and PHEV (plug-in hybrid EV) have doubled between 2018 and 2021, it is only 0.8% of all registered vehicles. The relatively slow adoption rate for EVs will likely keep ethanol as a viable industry for the years to come, but also create a slow but systematic drain on future ethanol demand.
While ethanol may not provide a catalyst for growth in future grain demand, recent policy initiatives have placed more emphasis on renewable diesel as a sustainable and environmentally friendly fuel for the heavy duty transportation system. Renewable diesel is chemically similar to traditional fossil diesel but it has a number of benefits including reducing CO2 emissions compared to fossil diesel and seamless engine infrastructure delivery through the same systems as fossil fuels.
Soybean oil is likely to be a significant feedstock used to produce renewable diesel because of its large availability and scalability in the future. Between 2023 and 2026, there is expected to be an extra 600 million bushels of new U.S. soybean processing capacity, representing a 27% increase over the sector’s output in 2021. This likely keeps soybean prices supported as the growing demand ramp up will require an extra 10 million acres from U.S. farmers in the coming years.
Fertilizer: Nitrogen-based fertilizers are greatly influenced by natural gas prices, and as such 2022 prices were nearly double what farmers paid in 2021. As natural gas prices have turned lower, we likely see a bit of a pullback on nitrogen fertilizer costs in 2023, but not as low as 2021.
Land/Rent: U.S. cropland values soared 20% over the past two years, and is adding to the cost of renting farm ground. Cash rent costs over that same two-year period are up 6.5% and likely continue to increase into 2023 to keep up with higher land values and rising interest rates.
Interest Rates: High inflation over the past year has caused the U.S. Federal Reserve to aggressively raise interest rates to their highest mark in 15 years. Although there has been a modest pullback on the inflation front, current inflation readings are still too high for interest rates to return to lower values soon. We expect interest rates to remain at current lofty levels for all of 2023.
Farmers Business Network® ( FBN®) is an independent AgTech platform and farmer-to-farmer network with a mission to power the prosperity of family farmers around the world while working towards a sustainable future. Its Farmers First® promise has attracted over 55,000 members to the network with a common goal of helping farmers maximize their farm’s profit potential with data and technology enabled direct-to farmer commerce, community and sustainability offerings. FBN has set out to redefine value and convenience for farmers by helping reduce the cost of production and maximize the value of their crops. The FBN® network has grown to cover more than 117 million acres of member farms in the US, Canada, and Australia. Blending the best of Midwestern agricultural roots and Silicon Valley technology, the company has over 900 personnel and principal offices in San Carlos, CA, Chicago, IL, Sioux Falls, SD, a Canadian Headquarters in High River, Alberta, and an Australian Headquarters in Perth with significant warehouse and logistics, remote and field employees across the US, Canada and Australia.
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