Harvest season has sprung upon us in a hurry. We had to spend a few evenings in the fields collecting squash, zucchini, cucumbers, and even dug up all of the potatoes, among the multitude of other things we planted this spring and continue to plant. It’s been a busy few weeks that have been hard both physically as well as mentally due to market conditions but we will get to that.
Current Macro ag is coming in hot. Commodities futures are up across the board due to ongoing floods in the Midwest, and even snow still falling in some places. The floods have been hitting to our north and turning entire fields into lakes that sit damp and unable to plant until dry. Our neighbors further north into Canada have recently been dumped on causing further delays in planting. The one thing I am watching is wheat. The general condition of the winter crop did not help in finding a stable floor for prices. This is not due to Ukraine, as I have outlined before, Ukraine exports most of its wheat to Egypt, etc. Our backfill of wheat comes from Canada, and that late start up north and poor southern winter yields is defining what is happening now.
Some limited USDA estimates should be in in the coming weeks but we have a strange divergence of just getting started in the north and down in Texas, harvest time is about to start. Spring wheat with a 6% increase in prices might make a few switch their planters over, but we will see.
On the Micro Ag level, consumer sentiment is in the toilet and the first thing that usually happens is niche, or perceived niche markets take a hit. Food inflation has hit communities hard as grocery stores continue to raise prices weekly. The farmers markets have somewhat moved in tandem, however not as aggressively. We have been asking $5 a dozen for pastured eggs for a little over a year now and are not really budging, poultry and pork prices are also stable. Feed is up but we’ve been able to absorb some of those costs. The private label beef guys are getting hit hard, more on that below; capacity issues are causing packing hell. We are also almost at market prices with potatoes. Retailers are at $3.07 a pound for conventional “baby” or broiling spuds, and we are selling for $3.33 a pound for organic. We are a little bit higher on squash and cucurbits but within range, yet organically grown. We match to convention prices these days because the costs of production of conventional versus organic is a function of time, not chemical used, another misconception of the organic movement. Meaning organic doesn’t cost us any more or less to farm in those guidelines per say, the licensing and certification IS a major price hurdle that none of us wish to jump.
On the cattle and protein side, we have seen prices continue to climb with retailers and yet the wholesale fed cattle is mostly flat.
Prices will continue to rise for food, unfortunately. That doesn’t seem to be waning. As for us, the farming community will start to see it’s cheaper for us to eat our inventory than to sell at market as prices invert. Cattle will most likely head for private slaughter (exacerbating packing hell), and will do so at an elevated pace later this year as drought, massive wildfires, and the lack of fertilizer have hit the hay markets hard, leaving less in dry storage heading into winter.
Next year, as a couple of analysts I have talked to recently have been looking at, is going to be interesting. Without access to Russian and Chinese fertilizer plants, the 2023 growing season might be brutal, coupled with even higher interest rates and sustained inflationary pressures.