Looking at predictions for 2017, producers might be forgiven for fearing a repeat of low commodity prices and unhappy market news. Market analyst Richard Brock, of Brock Associates, says you might want to temper that despair.
“There are two key issues to discuss,” says Brock in early January. “The primary thesis to get across is we’re nearing the end of the down cycle in agriculture. I think 2017 is similar to the 1986/1987 timeframe when the risk of expanding and starting in farming was the lowest in 30 years. I think the next two years will be the best opportunity for farmers to grow.”
Back in 1986/1987, “farmers were afraid to do anything and all the news was negative. Yet, in retrospect that was the exact time to start expanding. I think that’s where we’re at now. Younger farmers who didn’t live through that time period need to look back at history.”
As agriculture is a cyclical business, “you need to expand when the risk is small. In 2012/2013, the risk was huge. There were high prices, high inputs and high land prices. Now, there are lower input prices, lower land prices and lower rents.”
Of course, commodity prices are lower, as well. “But we are looking at the end of the down cycle on the input side and are in the process of bottoming corn, soybeans, cotton and wheat prices. It may take a while for things to turn around. Once that turnaround happens, though, it’ll be too late to go with a robust expansion.”
The second thing Brock points to is the biggest risk for Southern farmers in 2017: a bear market in soybeans. “We’re looking at an extremely large expansion in planted acreage. We already have a very large carryover in soybeans – that could double in 2017.
“Unless some miracle happens, we’re looking at soybeans in the $7 range, possibly lower. We’re looking at close to $10, right now. So, there’s an enormous amount of risk for soybean producers.”
What about cotton?
“I think the cotton industry will have a fairly good year. The producers had a decent 2016. There’s some pretty strong demand at the moment.
“Producers have live through a tough three years. We’re seeing currency issues in India impacting cotton prices positively. Indian farmers aren’t selling their cotton because they aren’t being paid enough.
“Worldwide, there are some very positive things happening. We’re looking at a situation where December cotton could be trading in the mid-70 (cent range) fairly soon. It’s going for 71 cents, right now. If it raises a few cents more, it’ll offer some real profit opportunities.”
Note: Brock, a frequent columnist for Delta Farm Press, will speak at the 2017 Mid-South Farm and Gin Show.