Volatility, Bull Markets and Conflict
Basse addresses cattlemen at CAB’s Feeding Quality Forum.
“As we look at the world economy, as we talk about what’s going on in agriculture, I have never seen so many balls in the air as we have right now. There’s so much going on,” said Dan Basse, president of AgResource Co., during the 2022 Feeding Quality Forum in August.
His career in market analysis spans four decades, and he told cattle feeders, ranchers and allied industry personnel gathered in Kansas City, Mo., that market volatility is as dramatic as ever.
Basse said agriculture today is a tale of multiple wars:
- The war between Russia and Ukraine. Typically 40-60 ships a day would travel out of Ukraine exporting grains, and today that is down to five or six, Basse said. The conflict has disrupted world grain trade and made already tight worldwide stocks even tighter.
“If this war goes into next spring, a lot of Ukrainian farmers will be out of business,” he said. “Structurally I’m more concerned about that for agriculture than any other ingredient today.” - The war of Mother Nature. “I don’t want to pick a side on the climate debate … all I can do is look at the data and I can see very clearly that the weather in many of the main grain-producing areas has been getting much hotter than we’ve seen over the past, roughly hundreds of years,” Basse said.
The droughts, floods and “heatflation” have held national averages on grain yields fairly steady for several years. AgResource predicts a U.S. corn yield this year between 172 and 176 bushels per acre at a time when a productivity boost is needed, he said.
“Feed prices are not going to relent, but they are going to be volatile.” - The war against inflation. “Notice that this is the biggest inflationary spike we have seen going back to the late 1970s,” Basse said.
Capital costs continue to increase, but the amount of commodities being produced is not increasing.
“I think we’re going to be stuck in a natural inflation rate between 3.5% and 4.5%.” The central banks will raise rates even higher to try to stimy that, Basse said, noting their goal of a 2% inflation rate. “The Fed (Federal Reserve) is trying to use a very blunt instrument, called rising interest rates, to hammer us in terms of demand.”
For all the challenges, Basse is encouraged by the record-high beef prices during this most recent time of record production, too. He says that bodes well for cattlemen now into the contraction phase of the cycle.
“We believe beef prices will soar higher as we head into the end of the year and early next year,” he said.
Watch for the October Angus Beef Bulletin to get a more in-depth summary of his comments, and hear directly from Basse in the Sept. 28 episode of the Angus at Work podcast.
Editor’s note: Certified Angus Beef hosted the 17th annual Feeding Quality Forum Aug. 23-24 in Kansas City, Mo. The event was sponsored by AngusLinkSM, Diamond V, Micronutrients, Feedlot Magazine, Select Sires, Performance Livestock Analytics part of Zoetis, and U.S. Premium Beef. To learn more or view coverage, visit www.feedingqualityforum.com.
