Uncertainty In Ag Markets Leaves Farmers/Ranchers In The Lurch

March 20, 2020 - 1:48pm

According to one market analyst, the coronavirus threat, alongside other contributing factors, have caused market uncertainty. Along with the collapsing of the stock market the past six weeks, agriculture markets have fallen as well. He says uncertainty in the markets will take some time to recover from.

Latest news & resources: netNebraska.org/coronavirus

Darin Newsom is a market analyst and president of Darin Newsom Analysis Inc. He says the US markets, including agriculture markets, are all connected. He called the recent drop in markets a domino effect that started with the trade war with China. The recent Saudi Arabia-Russia price war was the next step, driving the price of global oil down. After that a sell-off in the livestock market and falling energy prices brought ethanol demand down. Then the price of corn fell, which placed pressure on the soybean and wheat markets. During times of uncertainty, Newsom says people usually leave the cash markets and purchase gold. Not this time.

“It wasn't gold this time which was unique,” Newsom said. “Usually when you have some sort of economic crisis, the flow of money goes to gold. This time it went to the U.S. dollar. We have been seeing countries around the world, putting money into the U.S. dollar and so the U.S. dollar continues to go up. That makes us supplies of everything from crude oil to cotton soybeans to wheat to corn, less attractive on the global stage.”

Newsom says Nebraska farmers are suffering a bit right now because of low commodity prices. He says ranchers are somewhat insulated from the collapse in the futures markets, although cattle prices are down too. However, when it comes to the grains markets, basis is starting to crumble leading to the panic selling of grain from last year. Farmers holding grain from last year are starting to see lower prices and a weaker basis.

“It’s a very dark time, market wise, we're talking about now months down the road for this thing to play out,” Newsom said. “While we get these momentary lapses where things look better, this is going to take a while to get through. While there's going to still be demand for food products – food and commodities –things aren't going to immediately get better. We’re going to have to continue to fight through this.”

Newsom says an overinflated stock market and a price war in crude oil at the same time means the Ag sector of the markets crumbled along with everything else.

Latest news & resources: netNebraska.org/coronavirus



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