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Best of NAMA 2023

Source: By Brent Gloy and David Widmar, Ag Econmic Insights

Although the 70 degree temperatures in Western Nebraska haven't made him think of Christmas, David has been reminding Brent that December is here and that means it's time for us to take a moment and reflect on the past year. As far as the ag economy goes, this has been one of the best in many years, but it has still been accompanied by lots of ups and downs as well as the emergence of new and different challenges and opportunities.

Corn and Soybean (and Most other Commodity) Profits Soar
There is little doubt that corn and soybean farmers will remember 2021 for many years. The combination of lower production costs and high commodity prices set the stage for strong profits in the farm economy, especially for corn and soybean production. When reviewing contribution margins, corn and soybean returns exceeded the highs observed between 2011- 2013.

That's a pretty nice outcome for many, but it has also set the stage for much higher prices for everything from farm inputs, to equipment, to land rents and values. By the end of the year, we started to see some signs of a pretty exuberant farm economy, particularly in equipment and real estate markets.

Fertilizer Prices Increase Dramatically
Nearly every ag input - from fuel to equipment to labor-started heading higher in 2021. But fertilizer went from 0 to 60 about as fast as an electric car, and really stands out as the input whose prices have changed the most. By the end of the year, most coffee shops were buzzing with new of sky high fertilizer prices. Remember those decade-low prices in 2021? Well, they are now only a fond memory as most fertilizer products shot higher, reaching dizzying highs as we head into 2022.

For those of us making 2022 budgets, it seems like we have to adjust our assumptions every few weeks. The causes of all this are up for debate, but among the contributing factors are supply chain constraints, inflationary concerns in the broad economy, higher energy prices, and the prospect of very strong farmer demand. While it's always risky to speculate on the year ahead, we're betting that how this story ends will probably be a major theme of our 2022 annual review.

Soybean Oil Price Surge
Move over "food versus fuel," the 2021 version of this seems to be "diesel versus donuts." After years of soybean oil prices around 30 cents per pound, prices exceeded 70 cents per pound throughout most of 2021. Bakers are voicing their concerns and asking the EPA to help by rolling back the biodiesel mandates. Digging into the data, we realized the trend of more soybean oil going to biodiesel has been underway for several years. This presents a pretty unique story on the ag demand front and one that will also bear watching in 2022.

To view the complete report, click here.

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