Key animal feed crops from soybeans to corn and hay to oats are all down nearly 25% this summer. Likewise for that other critical grain -wheat- the stuff we break bread for.The yearly market price trend for these hugely important ag commodities is strikingly similar -all heading down.
Abundant supplies as well as worldwide competition has helped nudge prices lower.
Soybeans are a huge world crop. You might connect soy to making tofu or soy milk or even biodiesel. But 75% of the crop goes to feed animals, including poultry, pigs and cattle. Grown on 87.5 million acres in the US, soybean prices have dropped about 26% in the past year and stand at four-year low.
An even bigger crop that covers much of the Midwest, is corn not only converted into your morning Cornflakes but more importantly – 40% of the crop is fed to animals.Ethanol manufacturers also use about 40 percent of the U.S. corn crop for ethanol fuel and related co-products.The majority of the ethanol is consumed in the domestic transportation fuel market.Here again the price of corn has dropped over 22% in the past year to $3.84 a bushel this week in the futures market – falling from $8 dollars a bushel in 2022.USDA projected corn acres to rise about 2.4 million acres, to 91 million, with production boosted by a larger area planted.
Corn futures are reaching a low not seen since October 2020, driven by an improved supply outlook and lackluster demand, according to one analysis.
The other big grain crop – wheat – was selling for over $7 dollars a bushel a year ago and is down to $5.16 today.Wheat is the second largest grain worldwide based on grain acreage and second largest based on total production volume. Wheat is the best of the cereal foods and provides more nourishment for humans than any other food source. Wheat is a major diet component because of the wheat plant’s agronomic adaptability, ease of grain storage and ease of converting grain into flour for making edible, palatable, interesting and satisfying foods .Wheat is grown on 49.5 million acres in the US.
California’s top ag industry- dairy -depends on feed to keep it running. Today, dairymen are breathing a little easier when it comes to their feed – not just because corn prices are down but alfalfa hay prices too. Alfalfa hay prices have dropped this summer. In May California premium hay sold for $320 a ton compared to $280 in May 2024 and $240 as of late July 2024, another feed ingredient registering about a 25% drop
Godsend?
Dairymen will tell you they have plenty of other challenges that are driving up their costs including tough regulation and labor costs.Still one popular dairy magazine’s cover story this month reports ” Declining Grain Prices: A Godsend for Dairy Producers.”
And lower feed price isn’t the only factor affecting what you pay at the market for meat for example. While the cost of feeding poultry may be down this year,poultry prices have declined only 4% according to the Trading Economics website.
Beef has decreased 12.74% since the beginning of 2024.
Now what?What will all this mean to food prices as the Fed considers lower interest rates?
Now a new report by the U.S Department of Agriculture indicates that the price of food will continue to decelerate throughout the year.
In 2024, prices for all food are predicted to increase 2.2%, with food-at-home prices projected to go up just 1%.
Looking beyond this year, the U.S. Department of Agriculture is forecasting the price for all food to increase 2% in 2025. Food-at-home prices could increase 0.7%.
Then there is the impact on fuel prices based on a 23% decline in corn prices. This is already happening with ethanol blended with gasoline wholesaling at $2.40 a gallon a year ago today down to $1.76. That’s a 27% decline. At the same time the gasoline it is blended with has dropped $.50 wholesale since April.
Lower transportation costs will mean truck deliveries to the grocery store will cost less as well as your trip to the grocery store.
One more benefit of lower oil prices translates into lower fertilizer cost for farmers.One report says anhydrous fertilizer costs less than half of what it did in 2022, as the nitrogen fertilizer’s average retail price continues its summer shrinkage.
Oil turmoilBut as of July 31 oil prices jumped on fear of war in the Middle East and supply disruptions.One factor holding down oil prices is reduced demand from China with their fuel imports down 11% in the first half of 2024.
At deadline oil analyst Tom Kloza writes that “Petroleum price disinflation on full view as July 2024 ends. OPIS/AAA average gas price of $3.492/gal is 26.5cts (-5.9%) below the same day last year. Diesel value of $3.815/gal is 22.1cts/gal beneath 2023. Even more disinflation for jet fuel prices.”