Commodity prices rising as ‘perfect storm’ driving corn to 10-year high
International factors, delayed planting pushes corn to near $8 per bushel
MITCHELL — Farmers in South Dakota and around the country are seeing the highest corn prices in 10 years thanks to a combination of international and domestic factors shifting the supply and demand balance for commodities.
“It’s kind of a perfect storm that has created the price environment we’re in today,” said Scott Stahl, president of the South Dakota Corn Growers Association who farms near Bridgewater. “Part of it is the overall inflationary environment in the United States that has culminated with the crisis in Ukraine, which is a very big time exporter of grain to the world. That’s putting stress on the balance sheet and more demand for American commodities.”
Corn prices hovered right around $8 per bushel earlier this week, with prices on Friday closer to $7.78 locally in Mitchell. Prices for corn haven’t been that high since 2012, Stahl said. Prices for other commodities are also up, with local prices for soybeans at about $16.31 and winter wheat at $10.93 locally.
The war in Ukraine has thrown a wrench into the works of one of the largest grain production areas in the world, with disruption to farming operations a result of the country's ongoing conflict with Russia.
Ukraine is one of the world’s top agricultural producers and exporters and plays a critical role in supplying oilseeds and grains to the global market. More than 55% of the country is arable land and agriculture provides employment for 14% of Ukraine’s population.
Agricultural products are Ukraine’s most important exports. In 2021 they totaled $27.8 billion, accounting for 41% of the country’s $68 billion in overall exports, according to the United States Department of Agriculture.
Taking Ukraine’s production capacity out of the equation has put more demand on the American market and boosted prices. Todd Yeaton, general manager for the Gavilon terminal elevator in Kimball, said the situation in Ukraine is playing a huge factor in current commodity prices, as has a reduced corn crop coming out of South America.
“First of all, the conflict in Ukraine. Ukraine is a significant exporter of corn, wheat and sunflowers. Then we had a reduced first corn crop in South America,” Yeaton said.
He said current domestic economic factors are playing a role, too. Tangible commodities like corn and wheat can be effective hedges against inflation, and buyers are drawn to them in times of instability.
“(Another factor) is that it’s a hedge against inflation. The funds have a tendency, with uncertainty, to go to tangible products, like grains and precious metals. So we’re seeing a combination of things,” Yeaton said.
Then there is the weather. South Dakota has been experiencing drought conditions since 2020, and the United States Drought Monitor indicates that much of the state remains under D2 conditions, which indicates severe drought. Only the far northeast corner of the state is not experiencing drought conditions at this time.
Combined with the cold temperatures, planting is not progressing as fast as it would in a typical year. The United States Department of Agriculture, in a report dated April 18, shows a total of 4% of corn planted in 18 selected states. That’s down from the 7% at this time last year. For soybeans, that number is currently at 1%, lower than the 3% from a year ago. For both crops, the report indicates no percentage planted thus far in South Dakota.
Stahl said farmers are watching factors like soil temperature as they get ready to plant.
“On top of that we have extremely dry areas over the corn belt compounded with cool temperatures that has caused a slowness in the planting season. And some colder soils have put the brakes on the planters,” Stahl said. “Farmers like to see soil temperatures around 50 degrees at 2 inches, and (Thursday morning) it was reading 40 degrees, but it can warm up rapidly with warmer temperatures.”
Stahl said the weather will warm up eventually, and with it farmers should start moving rapidly into the fields.
Chet Edinger, a farmer from Mitchell who farms near Letcher and White Lake, also used the term “perfect storm” when describing the conditions that are pushing grain prices up. He agreed the increase was the result of multiple factors, with no one in particular more responsible for the jump than any other.
“Wheat prices are at extremely high levels, soybeans prices are high, sunflower prices are at record highs, corn is at lifetime highs. All the commodities have been on a major rally due to a number of factors, and there’s no one factor to point to,” Edinger said.
Edinger said he had been testing and tuning his planters and planted a handful of acres of corn this week, and will be looking to get fully rolling in the fields next week, assuming the weather cooperates. After that, it’s all about a smooth planting season and good weather.
While the dry conditions allow for planting as many acres as possible and in low spots that might otherwise be flooded, timely rains are needed for a healthy crop. That’s just another factor that is out of the producer's hands, he said.
“The big caveat is rainfall at this point. I’ve been farming since 1992, and this is the driest we’ve ever planted in my career,” Edinger said. “We will need rain soon in order to get the crop off to a good start.”
This weekend may offer a bit of relief on that front. The forecast called for temperatures to top 80 degrees in Mitchell Friday afternoon, and evening thunderstorms are a possibility throughout the eastern part of the state, with high winds and rain expected. The Rapid City area may see a heavy blanket of snow. The weather event is expected to last through Sunday.
At this stage, farmers will take whatever moisture they can get. If the weather finally turns the corner and delivers a much-needed shot of rain, the growing season can get off to a good start and can hopefully end with high yields.
“We are set up for a banner year in crop farming, however we need to hit some timely rains to make it work so we can have that banner year,” Edinger said. “That would be the number one concern on every farmer’s mind right now. We need to get it in the ground, do our job and hopefully the rains will come.”