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Published Feb 25, 2021

How Chinese Buying Is Causing a Boom in Agricultural Commodities

Economist Scott Irwin explores the growing influence of Chinese demand on global agricultural commodities, examining futures market roles and U.S. agricultural trends amidst policy changes and environmental challenges.
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  • Policy Impact

    President Biden's agricultural policies could significantly influence US agriculture, particularly with a focus on climate change. highlights the potential impact of renewable fuel mandates and the expansion of renewable diesel plants, which could alter demand dynamics in the agricultural sector 1. The administration's stance on ethanol, possibly increasing the standard from 10% to 15%, could also be a game-changer 1.

    This is definitely an area that I'm paying really close attention to, and I think has the potential to be probably the biggest demand game changer, both negatively and positively for AG in the next few years.

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    These policy shifts are layered on existing renewable fuel standards, adding complexity to the agricultural landscape 2.

       

    Economic Morale

    Economic morale among US farmers is closely tied to commodity prices, with higher prices often leading to increased satisfaction. notes that current cash prices for corn and soybeans are above levels that would typically make farmers happy, contributing to a more positive outlook 3. However, structural issues like droughts and the influence of large industrial farms continue to challenge small farmers 4.

    If you could assure Illinois farmers of $4 corn and eleven or $12 soybeans, there'd be a lot of smiles.

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    These factors, combined with the concentrated buying power of slaughterhouses, add layers of complexity to the economic morale of farmers 4.

       

    Weather Impact

    Recent extreme weather events, such as the Texas arctic blast, have had significant effects on US agriculture. explains that while natural gas disruptions may be short-lived, the impact on cattle feed yards and winter wheat production could be more enduring 5. The prolonged cold temperatures pose a risk to dormant wheat crops, potentially leading to what is known as winter kill 5.

    You can kill the wheat crop seven times a year with bad weather, but this was a length of low temperatures that was extraordinarily long even by Great Plains standards.

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    These conditions highlight the vulnerability of agriculture to natural disasters, emphasizing the need for resilience in farming practices 5.

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