Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: East

Omicron generates familiar ag challenges

Getty/iStockphoto Mutating virus variant and cell mutation variants as a health risk concept and new coronavirus outbreak or covid-19 viral cells mutations and influenza background as a 3D render.
Ag sector scrambles to minimize supply chain disruptions as the U.S. economy strengthens.

Despite the recent surge in COVID cases and the complications it brings, the U.S. economy shows strength. Workers are steadily returning to the labor force, the unemployment rate is currently under 4%, and consumers are still spending confidently.

Until the omicron surge subsides, the biggest economic risk will be the millions of workers who report sick. The impacts for food and agriculture sectors will vary significantly by product, but will generally be less severe than earlier in the pandemic, according to a new Quarterly report from CoBank’s Knowledge Exchange.

The agricultural sector will battle through familiar challenges in coming weeks as persistent labor challenges become critical, the report explains. Dairy and animal protein processors will try to minimize production slowdowns, and farm input retailers will scramble to build inventory before spring field work begins.

As the labor market inches closer to full employment, any last arguments for the Federal Reserve to maintain its highly accommodative monetary policy are losing their merit. With the market now anticipating a change in monetary policy, the tightening of financial conditions has begun.

Grains, farm supply and biofuels

Corn and soybean futures prices traded higher in the fourth quarter of 2021, reaching six-month highs at the end of December.

Grain exports are recovering after barge movement disruptions caused by Hurricane Ida lingered into the fourth quarter. However, combined corn, soybean and wheat shipments to China have fallen by one-third compared to last season.

Partially offsetting the decline in Chinese buying, combined exports of corn, soybeans and wheat to Mexico increased by 24%, led by a 36% increase in corn purchases.

Fertilizer prices continued to climb, increasing approximately 20% in Q4 and 160% versus the year prior. Input cost inflation, crop protection product shortages and labor challenges could threaten farm supply margins through the spring 2022 planting season and potentially beyond.

Ethanol production rebounded to pre-COVID levels and Q4 profit margins rose to all-time records, currently averaging $1.34 per gallon. Production reached a record 17 billion gallons annualized for two consecutive weeks in late October, before settling down to 16.3 billion at year end.

Animal protein and dairy

 U.S. animal protein production moved moderately higher through Q4, but supplies remain under pressure due to robust demand. Combined production of red meat and poultry set a November record of 8.9 billion pounds, 3.5% larger than a year earlier. Ending stocks of poultry were down to five-year lows, and pork inventories hit 12-year lows. Meanwhile, fourth quarter wholesale meat indexes were 25% higher year-over-year, reflecting the heightened demand for animal proteins. 

China’s imports of animal protein have slowed significantly from their record peaks during the summer months. For U.S. producers, reliance on China has waned for poultry and pork, while the opportunities for beef remain robust.

Milk supplies tightened further in Q4 as the U.S. dairy herd continued to shrink, particularly in the West and Southwest regions of the U.S. where feed availability remains a persistent challenge. However, signs of prosperity are on the horizon as heifer prices rise, dairy cow slaughter moderates and farm sales slow.

Cotton, rice and specialty crops

Cotton futures prices hit $1.20 per pound in late November, the highest close in over a decade. But news of the omicron variant hit shortly thereafter, and cotton futures dropped 10-15 cents. Nonetheless, prices held above the longer-term upward trend that began in April 2020. However, despite the nearly two-year bull market, there is an increasing threat of downside risk as global stocks appear to be ample.

Rough rice futures languished in Q4 amid abundant exportable supplies in India and declining export price competitiveness. Persistent weakness in the Brazilian real has been a headwind to U.S. rice as Brazilian rice exports are more competitive in Western Hemisphere markets. U.S. export sales commitments for all rice in the current marketing year are down 36% year-over-year and shipments are down 5%.

The sugarbeet harvest is complete and record yields are expected following ideal growing conditions across the upper U.S growing region. U.S. sugar deliveries for human consumption have grown a combined 2.1% over the past two years. The question for 2022 is whether wholesale prices approaching 50 cents/lb. will finally put a crimp in sugar consumption.

The producer price index for specialty crops climbed sharply last quarter as smaller harvests drove farmgate prices higher. The rise in fruit and vegetable prices is due mostly to the persistent drought across the U.S. West that cut production through lower acreage and yields. The smaller tree nut harvest this fall is also sending almond, walnut and pistachio prices higher for both growers and consumers.

Source: CoBank, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.