March 2021 – Kenneth Scott Zuckerberg
Key Points
- U.S. farmers are in a sound financial position heading into spring 2021 given the cyclical turn in grain prices and robust government support, both of which have driven a rise in net farm income.
- This, combined with other strong fundamental factors, generally positions U.S. farm supply cooperatives for a profitable spring agronomy season. Those factors include a meaningful expansion in corn, soybean, and wheat planted acres in response to global imbalances between supply and demand, and rising fertilizer prices which are positive for retailer margins.
- Our favorable outlook is further supported by a review of proprietary internal data (obtained on a lagged basis) that points to normal build of agronomic inventories (seed, fertilizer, and crop protection chemicals) and higher farmer prepayments on those inventories.
- Improving profits for cooperative agronomy departments should help cushion the negative carry in grain markets due to the backwardation (inversion) in corn, soybean and futures prices.
- Key risk factors for the planting season include the recent cold and wet weather, which could delay planting, and some logistical bottlenecks creating input shortages in certain parts of the country.
