Commodities & The Land Market in 2020

September 30, 2020

2020 has been a year in which we have jumped our fair share of hurdles from oversupplies of grains to watching the global pandemic demolish our demand in the blink of an eye. Farmers have had to be resourceful and make the most out of a particularly challenging situation. We have seen the direct effects on the produce and livestock markets as eating habits of consumers change at hyper-speed. We have endured a growing season that was not completely favorable across the Midwest for row crop farmers, throwing us back and forth between too wet to too dry conditions.

So where does that lead us now that we are hopefully on the backside of the mountain? Challenges will remain even with demand ramping up as most agricultural goods are increasing in price. We have now actively started selling large amounts of grains into China over the last few months. Trade was extremely skeptical of these transactions as we have had our patience put to the test in the past with cancellations out of China. Will China cancel their US purchases? Well it is a question that will be looming over us the next few months. China is a very closed-off country as far as letting the world know what is going on economically. With that being said, the Chinese Government has sold off most of their corn reserves due to quality concerns over the last few months leaving their appetite for US or South American corn very high. If you add to the equation that China has seen large amounts of flooding to their agricultural regions, I think it is strong indication that a majority of the sales will continue as long as we can maintain or build on our current trade agreements. If we can maintain our current clients along with adding China back into the equation with purchasing US based commodities, that will add support behind commodity prices.

Outside of prices for grains we have also seen a lot of support within the land market since COVID-19 was first introduced. My personal reasoning behind the support is a significant decrease in interest rates and the desire to have a “physical” investment. In the beginning of the shutdown in the US due to COVID-19, we saw a pullback on the stock market that sent shockwaves through many investors. The results of those shockwaves have many investors looking at land so they can have a steady return and with anticipation that farmland will appreciate in value. Land also provides the feeling of actually owning something that you can physically touch and see, as opposed to simply owning an investment on paper. The downturn of the interest rate market has also brought the valuation of bonds down, leaving a lot of lower risk investments struggling to compete with inflation. With ramped up demand for commodities, I foresee we will see support in the land market to keep land prices moving forward.

About the Author: Adam Bauer joined our team in 2018 as a Land Broker, focusing primarily on land real estate in Schuyler, Brown, McDonough, and Fulton Counties. Adam is a fifth-generation farmer and Schuyler-county native who was raised on a Central Illinois farm, working alongside his family to this day raising corn, soybeans, and livestock. Adam has spent his entire life immersed in agriculture, and has invested in a wide variety of education that’s developed a well-rounded knowledge of the “business side” of agriculture. He and our Appraiser Trainee, Bill Pherigo, also own My Farm Business, LLC which works with farmers on growth model strategies, debt management strategies, large-scale grain marketing, and crop insurance.