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Market rally fueled on several fronts

An agricultural economist with the University of Illinois says the pre-harvest market rally can be attributed to several factors.

During a recent FarmDoc webinar, Gary Schnitkey says over the past month producers have seen commodity prices improve, primarily due to global conflict.

“We’re seeing exports from the Black Sea area facing severe problems, which is taking off that crop from the market, and so that is building into those price expectations,” he says.

He says favorable federal biofuels policy and questions about the U.S. crop size are also positive.

“People believe that there’s lower yields out here in the United States, probably even lower than what USDA is projecting.”  He says, “Again, that would put upward pressure on prices because there’s lower supply.”

Even with the higher prices, Schnitkey says profitability could be elusive for many farmers.

“Our cost structure is considerably higher than it was in the past,” he says.

He says most producers have taken advantage of the rally to lock in some of the best returns they’ve seen in several years.