Ag commodity prices cool after late-spring spikes

After approaching record highs this spring, agricultural commodities prices have retreated in recent weeks — though prices remain elevated to varying degrees.

By week's end, at CHS-owned elevators across Minnesota, farmers were getting less than what they could've received a few months ago. July corn sold in Winona for $7.08 a bushel — well off the nearly $8 mark it hit in mid-April. Soybeans, similarly, fetched $16.09 in Fairmont, nearly $1.50 lower than June 9.

Wheat, too, has seen prices cool significantly. While the small grain sold for $13 a bushel in Roseau on May 16, this week it was closer to $9.

Each commodity has its own story for the softening. An opening of grain shipments on the Black Sea and stronger-than-anticipated forecasts from Ukrainian wheat farmers has alleviated earlier anxieties about a global grain shortage. Moreover, with corn, many analysts and farmers look to Brazil.

"South American crops start to come online in terms of competing with our corn about this time," said Faribault County corn farmer Gary Prescher of rural Delavan, who said longtime farmers have come to expect a seasonal price drop in June.

Jason Ward of Northstar Commodity in Minneapolis similarly points to the Brazilian government's forecast for a record harvest.

"A lot of the private sector doesn't think the crop is that big," cautioned Ward, "but it's harvest time. So we're going to sit back and wait to see how big that crop is."

Ward points to another factor across agricultural commodities that boosted those late-spring and early summer prices: hedge funds.

"If you go back a month, we had a lot of what we'll call Tom, Dick and Harrys in the market," Ward said. "Commodities were a popular place to be as a hedge against inflation, and they outperformed equities."

Unlike in 2012, when a pop in the corn market led to years of higher costs for end-users — such as dairy farmers feeding grain to their cows — the high prices of 2022 have vanished in a blip.

"The fund managers said, 'Thank you very much, agriculture. I'm happy to have taken some piece of the pie out, but now I'm gone,'" said Ward.

Just months ago, higher prices were only cautiously embraced by farmers, who predicted what the elevators could pay for their grain might soon drop while those sky-high fuel and fertilizer costs remain.

For the rest of the summer, analysts say, weather — specifically if moisture will hit the fields — is what will affect farmers the most in the near-term. Despite late plantings around Minnesota, a mid-June heatwave provided necessary sunshine.

"I think it could be a good year [for yields]," Jeff Coulter, corn agronomist with the University of Minnesota Extension, said on Wednesday. "We've had warmer weather now, and it seems like the crop is catching up. I'm still quite optimistic."