May 2, 2022
Having farmed for three decades in the
Midwest and been involved in agriculture for another two,
I have never witnessed the current heightened level of uncertainties in
production ag. Every new growing season brings the normal unknowns to it. What
will the weather be from planting to harvest? Where are grain prices headed?
What are the new farm programs or crop insurance details? Farmers also deal
with changing cash rental rates, trying to secure new farms to operate, and
keeping their equipment running. Both vendors and the ag industry deal with
seasonality issues and logistics. The challenges for producers and the industry
would change somewhat from year to year, but this is a basic list.
For 2022, there are more uncertainties all at
one time than ever facing farmers, landowners, and the ag industry. There are a
number of very large uncertainties staring agriculture in the face this year.
Supply chain issues, never experienced to this degree before, have created
uncertainties in product availability, technology deployment, exports,
processing, equipment repairs, and more. The Ukrainian War has thrown in a
multitude of additional uncertainties for food and ag that have not been seen
in decades. How to handle rising input costs for fuel, fertilizer, and others
has created more uncertainty than usual for producers. Grain prices are at
historic levels but will they go higher or lower during the growing season?
Inflation has sprung into everyone's concern after being mostly absent for
decades. Interest rate direction will also impact agriculture.
In addition to the above uncertainties
leading into the 2022 growing season, the US is facing extreme weather
conditions this spring. On top of being too wet in the east and a spreading
drought in the west, the planting season is off to a slow start due to the
additional challenge of colder spring weather. Uncertainty abounds for the
planting of spring crops let alone the worry of summer rainfall and heat
potential. Weather uncertainties are a given in agriculture, but more pressure
than usual is on the production of large grain and oilseed crops due to
heightened demand, world food shortage concerns, and trade disruptions from the
Ukrainian War.
As we are well aware today, anything can
change at a moment's notice with the weather, world events, government actions,
and everything else in between. Agriculture has more unknowns or uncertainties
confronting it than usual this year, but one or more of these can change on a
dime. Despite the uncertainties, it is generally accepted during times like these
that farmland is traditionally a safe, secure, long-term investment. Stay tuned
to see how the uncertainties of 2022 unfold and affect the land market.
Randy
Dickhut
Senior Vice President - Real Estate Operations
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