Farm commodity prices have been on the rise lately, and this is causing a lot of concern among farmers. Many are wondering what this means for their business, and how they can prepare for these price fluctuations. In this blog post, we will take a closer look at farm commodity prices and what this could mean for the agricultural industry as a whole. We will also discuss some strategies that farmers can use to protect themselves against market volatility.
What’s the Current Situation of Farm Commodity Prices?
Adjustments in farm commodity prices are a normal occurrence in the agricultural industry. However, the recent surge in prices is unprecedented and has caught many farmers off guard. In comparison to the same week last year, the prices of the most heavily advertised items were as follows, based on market data from the US Department of Agriculture (USDA):
Significant increases in price for fruit this week include red cherries, which rose by 41% this week, avocados, by 18%, cantaloupes, by 10%, and 1-pint blueberries and apple juice by 10%, were among the fruit items that saw notable price increases.
Only three produce items saw significant declines: strawberries (14%), blackberries (15%), and black seedless grapes (14%). This week, there were significant price changes for potatoes and onions, but the price of sweet yellow onions only increased by 14 percent (per pound). On-the-vine tomatoes, corn, bell peppers (red, yellow, orange), and seedless cucumbers all saw significant price increases as well. Corn prices saw a 27 percent increase, while on-the-vine tomatoes saw a 20 percent increase. Cucumber production fell by 19 percent, the only significantly lower number.
These are just the most recent example, but farm commodity prices have been on the rise for some time now. So, what’s driving these increases in prices?
Factors Causing Agricultural Commodity Prices to Soar
There are a number of factors that can affect the prices of agricultural commodities. These include weather conditions, global demand, trade tensions, and the ongoing war between Russia and Ukraine. Let’s take a closer look at each of these factors:
Weather conditions can have a big impact on ag commodity prices. Flood and drought conditions, for example, can damage crops and lead to shortages. This, in turn, can cause prices to spike.
In the past year, we’ve seen a number of extreme weather conditions that have impacted ag commodity prices. For example, last summer’s heatwave in Europe led to poor harvests for wheat and other crops. This helped drive up prices for these commodities.
More recently, we’ve seen a severe drought in Brazil. This has impacted the country’s coffee and sugar crops, leading to higher prices for these commodities.
Another factor that can affect commodity price change is global demand. The current situation with the coronavirus is a perfect example of this. The outbreak of the virus in China has led to a decrease in global demand for many commodities, including pork and soybeans. This has had a ripple effect on prices, as farmers are now struggling to sell their products.
Trade tensions between the US and China have led to higher tariffs on agricultural products. This has made US exports more expensive and has led to a decline in demand for these products. This, in turn, has put downward pressure on prices.
On-Going War Between Russia and Ukraine
The ongoing war between Russia and Ukraine has led to a decrease in exports of agricultural products from these countries. This has led to an increase in prices for these products, as there is less supply available on the market. The war has also led to a decline in the value of the Russian ruble, which has made imported products more expensive.
What Does This Mean for Farmers?
The recent increases in commodity prices can be good news for farmers. Higher prices mean higher profits and more money to reinvest in their operations. However, farmers need to be aware of the potential risks associated with higher prices. Inflation and higher production costs can eat into profits, and the long-term impact of higher prices on the economy can have negative consequences in the form of higher food costs and inflation. Farmers need to be mindful of these risks and make sure they are hedging their bets by diversifying their operations. This will help them weather any potential storms on the horizon.
Farm Plus Financial is Here to Help
At Farm Plus Financial, we understand the challenges farmers face. We offer a variety of financial products that can help farmers weather any storms that come their way. Contact us today to learn more about our services and how we can help you protect your operation.