The start of another busy cropping season this year brings an added bonus: Distraction from the barrage of headlines triggered by world events. Markets too may hit the mute button on war and shift attention from one worry to another: weather. The “real world” will still be waiting in the wings but conditions for planting and growing should be front and center.
USDA set the stage for spring with March 31 reports that didn’t generate major changes. With expected yields rising to 185.3 bushels per acre that could still mean a crop topping 16 billion bushels, almost as big as the 2025 record.
If strong demand noted in Grain Stocks continues, supplies left over at the end of the marketing year Aug. 31, 2027, could remain large, topping 1.9 billion. Average cash prices received by farmers might inch higher to $4.35, creating a top third futures selling range of $4.65 to $5.05, which is where prices closed before the holiday weekend.
USDA put soybean seedings at 84.7 million acres. That would be enough to keep soybean carryover stable, helping futures edge into my forecast selling target range of $11.50 to $12.30.
While fundamentals of supply and demand suggest pricing new crop, both corn and soybeans are deep in the red at current levels for the average grower trying to cover all costs, including family living expenses and replacement of assets like machinery and buildings. Break-even cash prices of $4.95 corn and $12.80 soybeans are still out of sight and the view likely won’t change unless yields are much better than expected.
Before the conflict, corn appeared to have a $10-per-acre advantage over soybeans, but uncertain nitrogen supplies could limit incentives to shift ground and dampen the ability of suppliers to move fertilizer into position for timely application. April ammonia settlements at the Gulf jumped $160 a ton to $775 after the war began, pushing dealers to raise offers near $1,000 a ton at many locations.
That might help soybeans, if demand wasn’t focused on President Trump’s looming visit to China next month. These summits usually include some type of ag deals for window dressing, but China has plenty of leverage thanks to its own sluggish import needs and big supplies available in South America.
Risk from higher costs ramped up after a strong jobs report on Good Friday included a lower jobless rate and continued hiring despite the surge in energy prices, a seeming contradiction caused by a labor force shrinking due to baby boomer retirements and lower immigration. The data rekindled fears of the stagflation that battered markets in the 1970s, causing interest rates and joblessness to soar, souring the economy and ultimately triggering the farm crisis of the 1980s.
Paul Volker’s ghost is not the only spirit haunting the economy deja vu and demonstrating how major economic disruptions caused generational shifts in markets. Memories of the pain caused by the “go-go” 1970s ultimately faded, and risk lost its negative connotations in the 1990s. That “What Me Worry?” attitude then came to a screeching halt known as the Great Financial Crisis of 2008-09, when risk’s reputation again became a four-letter word. Now the question is which era will prevail as a pattern after the Iran war, $110 crude oil and a surge in fertilizer costs.
The crude oil connection illustrates these great divides. From 1970-1989 petroleum prices moved hand-in-hand with world harvested acreage and revenues produced by agriculture. But those correlations fell apart over the past 15 years: Higher crude brought lower world acreage and flat ag sales, increasing potential for prices to rally after the March 31 reports to convince farmers to sow more corn than intentions, which in turn increased importance of timely planting to maintain yields and boost profits.
So, in addition to everything else, the Iran war raises a long-term question: Is this the start of another era? The answer is all the more difficult because we don’t know if the current geopolitical game is multidimensional chess — or bumper cars.