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Variation in Corn Prices in the Southeast
Corn prices are outside producers’ control, marketing is not. Corn prices are influenced by domestic and global supply and demand, government policies, and money flows between asset categories. While it is important for corn producers to understand and monitor factors influencing global and national prices, it is equally important to understand local market conditions and sale opportunities that can substantially increase average cash sales price.

In general, corn prices in the Southeast are higher than the national average (Table 1 and Figures 1 and 2). Of the four states analyzed North Carolina and Texas had the highest five-year average cash price, however all four states had five-year average monthly prices greater than the national average. 2021 presented a slightly different picture with Kentucky having lower prices in six months than the national average. Additionally, both Tennessee (September) and North Carolina (August) had months with state average prices below the national average.

While Southeast corn prices are generally higher, it is important that producers understand seasonal trends, returns to storage, and historical basis to consistently obtain a higher cash price. This is primarily due to strong demand from poultry, livestock, ethanol, distilleries, and proximity to export markets through Mississippi River terminals or ocean ports. However, tremendous variation exists between states and within states based on prevailing local supply and demand. As such, understanding local market conditions is essential. Three basic considerations that should be factored into every corn producer’s marketing plan are:
1. Typical harvest period– Harvest interval will vary by location and will influence when early harvest premiums may become available. Harvest timing can vary from year-to-year due to planting and weather, so it is important to account for both “typical” harvest timing and current growing season influences.
2. Storage – For many Southeast producers, storage is one of the most effective marketing tools. Storage can help mitigate production risk and extend the marketing interval. Storing the crop allows producers to know what they have to sell before committing to a final cash price. It is important to note that this does not eliminate the need for in-season price risk management tools (ie. options and crop insurance). Not having to sell the crop at harvest typically avoids seasonal price lows in futures markets and basis.
3. On-demand sales opportunities – Due to high demand for corn in many locations, producers who have storage can also have the ability to meet on demand requests, for a price premium, for large corn end users. To access these markets, producers need to be on the end user’s contact list to obtain emergency or short turnaround corn supplies and be able to deliver corn quickly (trucking requirement).
Producers should utilize their knowledge of local supply and demand factors to extract the highest cash price possible. Developing a marketing plan and risk management strategy that factors in national price trends and local market conditions will aid in achieving higher prices in local markets.

Table 1. Average Monthly Corn Prices

Source: USDA NASS

Figure 1. Five-Year Monthly Average Corn Prices for Select Southeast States Minus the National Average

Source: USDA NASS

Figure 2. 2021 Monthly Average Corn Prices for Select Southeast States Minus the National Average

Source: USDA NASS

Smith, Aaron. “Variation in Corn Prices in the Southeast.” Southern Ag Today 2(6.1). January 31, 2022. Permalink
January 31, 2022
Promoting the Importance of Southern Farm Raised Oysters

Southern oysters are an important food source with a rich cultural and culinary history. Because of this, it is not surprising that southern consumers tend to eat more oysters than those in other parts of the US. And, with wild oyster harvests diminishing, the south is experiencing a dramatic rise in oyster aquaculture farms. However, unlike most seafood products, farmed oysters cost more than wild harvested oysters. This places the marketing burden on oyster producers to differentiate their farm-raised products to justify higher prices.

To help oyster marketing efforts, several southern land grant universities have researched oyster consumers to determine key marketable oyster traits. Clemson University researchers have also completed an oyster consumer preference study, with results forthcoming. In addition to oyster consumer preferences, Clemson research also discovered two key findings about consumer perception of oyster farming: more than half of consumers (58%) did not know that most oysters are farm-raised (worldwide), and almost half (45.6%) were unsure whether farmed oysters are good or bad for the environment.

This finding represents a golden marketing opportunity for oyster farmers to educate the public on the importance of supplementing wild harvests and the environmental benefits of oyster farming. Rather than try and manage public perception after the fact, oyster producers can get in front of the news and manage a positive narrative about oyster farming. Because of the appeal to the general public, this message may be easily amplified through public-service-announcements (free) sources such as the local media, land grant universities and cooperative extension, Sea Grant, and Farm Bureau. Local and state restaurant associations and chambers of commerce may also be prime audiences, as they can communicate this message to their members.

It is also important to collaborate with other southern oyster producers to strengthen communication and marketing efforts. An excellent example of this sort of collaboration is Oyster South, whose annual symposium will be held February 3-5, 2022, in Biloxi, Mississippi. For more information on the symposium, please visit www.oystersouth.com. For more information on the findings of Clemson’s oyster consumer preference survey, please contact the author directly.

Richards, Steve. “Promoting the Importance of Southern Farm Raised Oysters.” Southern Ag Today 2(5.5). January 28, 2022. Permalink

January 28, 2022
U.S. Imports and the Continued Rise in Fertilizer Prices

Last November, I wrote an article for Southern Ag Today about the spike in fertilizer prices. Since that time, import prices have continued to rise. As mentioned in the previous article, U.S. fertilizer imports have averaged nearly $6 billion over the last five years (around 25 million metric tons), accounting for a significant share of total U.S. fertilizer use (USDA-ERS, 2019). Additionally, the global fertilizer market had already been tightening before plants were forced to cut production given the rise in the cost of natural gas, a key feedstock (Larkin, 2021). Given the continued rise in U.S. fertilizer prices, a more detailed look at imports could help explain why the price of some fertilizers have increased more than others.

In 2020, the U.S. imported about $6.5 billion in fertilizer. That year, the top imports included potassium chloride ($2.7 billion), urea ($1.3 billion), monoammonium phosphate ($590 million), urea-ammonium ($400 million), and diammonium phosphate ($400 million). In January 2020, import prices ranged from as low as $130 per metric ton (MT) for urea-ammonium to about $267/MT for and diammonium phosphate. In 2021, diammonium phosphate increased to over $1000/MT and monoammonium phosphate increased to over $700/MT; urea increased to over $500/MT. Interestingly, the price of imported diammonium phosphate fell in November 2021 to $625/MT, which was a significant decline from the $1,008/MT high the previous month. Other trends, however, suggest that fertilizer import prices will continue to increase.

U.S. Fertilizer Import Prices Significantly Higher in 2021 Due to Global Supply and Demand Issues

Source: U.S. Department of Agriculture, Foreign Agricultural Service’s Global Agricultural Trade System (2022). https://apps.fas.usda.gov/GATS/default.aspx

References

Larkin, N. (October 15, 2021) Supply Lines Fertilizer Crisis Piles More Pressure on World’s Future Food Supply. Bloomberg. https://www.bloomberg.com/news/newsletters/2021-10-15/supply-chain-latest-warnings-mount-over-fertilizer-crisis

U.S. Department of Agriculture, Economic Research Service (USDA-ERS) (2019). Fertilizer Use and Price. https://www.ers.usda.gov/data-products/fertilizer-use-and-price.aspx

U.S. Department of Agriculture, Foreign Agricultural Service (USDA-FAS) (2022). Global Agricultural Trade System. GATSFertilizer Use and Price. https://apps.fas.usda.gov/gats/default.aspx

Muhammad, Andrew. “U.S. Imports and the Continued Rise in Fertilizer Prices.” Southern Ag Today 2(5.4). January 27, 2022. Permalink

January 27, 2022
The Perfect Fertilizer Storm

Sky-rocketing fertilizer prices have dominated ag industry discussions over the last year, and for good reason.  By now, the peaks & valleys of the price chart below should be familiar, and most of you remember living through these price cycles.  The price climb that began in late summer 2020 is the most dramatic since 2008 and we are now seeing spot prices more than double and even triple the average prices seen over the 4-5 years preceding 2020.  The discussion generally starts with: what is causing these kinds of prices?  In this particular case, there does not seem to be any one culprit.  Instead, it might be best described as a perfect storm of factors that are all creating upward price pressure.

Demand:  An increase in commodity prices (particularly corn price) is expected to lead to an increased demand for fertilizer.  Corn rose above $7.00/bu in the summer of 2008; fertilizer prices spiked soon after.  Again in 2021, corn broke through $7.00/bu, and we have seen what has followed with fertilizer.  There is an obvious connection.  What about residential fertilizer demand?  We know the Covid Era of increased work from home created higher demand for landscaping, lawn equipment, etc.  People were home more often, therefore paying more attention to the lawn and garden.  Without finding the specific data, it is a safe bet we are collectively demanding/using more residential fertilizer, as well.

Supply:  Often times, demand is met by ramping up supply to satisfy the increased need and moderate upward price pressure.  However, we find the fertilizer market (along with so many other industries) currently overwhelmed with supply struggles.  Global natural gas prices have increased the cost of fertilizer production, some traditional exporting countries are shipping less to ensure their own domestic supply, and the geo-political landscape of trade battles and imposed tariffs have further slowed supply.  Finally, physical supply chain disruptions and increased cost of product transportation have slowed supply to the point of questionable availability at given times/locations.

The challenge moving forward is that we have yet to see a light at the end of the tunnel.  History would suggest prices will eventually ease, but no evidence today indicates any relief throughout the 2022 production season.  Next week, we will examine the farm level financial impacts of producers enduring higher input costs.  Tomorrow (Southern Ag Today, Jan 27, 2022), Dr. Andrew Muhammad will dig a little deeper into the trade/import markets for specific fertilizer products.

Monthly Average Fertilizer Nutrient Prices, January 2000 to October 2021

Source: AFPC Briefing Paper 22-01, compiled from DTN spot market price data for the last trading day of each month. The markets include New Orleans, Corn Belt, Southern Plains, South Central, Southeast and Florida. The phosphorous price is specifically for diammonium phosphate (DAP).

Reference:

Outlaw, et al. Economic Impact of Higher Fertilizer Prices on AFPC’s Representative Crop Farms.  Texas A&M University System, Agricultural and Food Policy Center Briefing Paper 22-01. January 2022.

Klose, Steven, and J. Marc Welch. “The Perfect Fertilizer Storm.” Southern Ag Today 2(5.3). January 26, 2022. Permalink

January 26, 2022
Seasonal Price Indices for Cull Livestock

The thought of marketing cull livestock is generally not at the top of mind for most livestock producers. However, it is an important decision from both a marketing and management standpoint. More specifically, most livestock producers are entering a period in which cull livestock prices tend to be increasing for cattle and hogs or they will be drastically decreasing for small ruminants. Thus, these seasonal price tendencies can be extremely useful when making marketing and management decisions.

Utility cow prices typically experience their largest price increase in February with prices for this class of animal peeking in May or June. Selling cows at the highest price point in the year may or may not be the best decision, but there is a nice marketing window for this class of animal from February through June. Hog producers generally experience a similar seasonal pattern for slaughter sows. The price of slaughter sows will increase from February through the summer months with a nice marketing window between April and August.

From the small ruminant standpoint, slaughter ewe and doe prices are typically at their peak in January and begin to decline in February. Prices then tend to decline through most of the year. Thus, sheep and goat producers may want to consider marketing cull ewes and does in the near term to capitalize on their current value.

Griffith, Andrew P. . “Seasonal Price Indices for Cull Livestock.” Southern Ag Today 2(5.2). January 25, 2022. Permalink

January 25, 2022