Arlan Suderman, chief commodities economist with StoneX Group, shares his 2021 commodity insights.
The agrifood industry has grappled with high corn and soybean prices and short stocks this winter. What can animal feed producers and nutritionists expect in the second half of 2021 and what potential risks may lie ahead?
In advance of his April 13 Feed Strategy webinar, “2021 Commodity Outlook: What is the new normal for feed prices?,” Arlan Suderman, chief commodities economist with StoneX Group, joined the Chat to share his thoughts on the state of grain price volatility.
Video transcript: Feed Strategy Chat with Arlan Suderman, chief commodities economist, StoneX Group
Jackie Roembke, editor, Feed Strategy: Hi, everyone. Welcome to Feed Strategy Chat. I’m your host, Jackie Roembke, editor of Feed Strategy magazine.
This edition of Feed Strategy Chat is brought to you by WATT Global Media and FeedStrategy.com. FeedStrategy.com is your source for the latest news and leading-edge analysis of the global animal feed industry.
Joining us on Zoom today, we have Arlan Suderman, chief commodities economist with StoneX Group. Arlan is here to share his 2021 commodity outlook.
Arlan Suderman, chief commodities economist with StoneX Group: Good to be with you today. Thank you.
Roembke: Great, thanks. We’re happy to have you.
Roembke: Grain prices and feed costs have soared in 2021. Is this the new normal or just a temporary setback for the agrifood industry?
Suderman: Unfortunately, it may be the new normal, depending on how you define temporary. I think the risks are there to see these elevated prices and maybe even at higher levels for some months yet, or even maybe several years, we’re seeing a couple of macro forces coming together. We do have a fundamental story with the grain and oilseeds with strong demand out of China — although African swine fever resurgence does provide some risk for that demand. And at the same time, there are weather production risks in South America and some increased concerns about the weather patterns setting up for the Midwest this summer here in the United States. So that’s the fundamental story.
And then when you look at the $4 trillion that were pumped into the economy last year with fiscal and monetary stimulus — and up to $2 trillion now expected to so far this year — that’s pumping a lot of money into the economy. M1 money supply is up 78% year on year, which unprecedented in nature. And we know from the data, a lot of that money is pumping into the markets, trading this fundamental story and amplifying the move.
So if you’re an end user of grain and oilseeds, and in the feed ingredients, the ingredients that go into your feeds, that is certainly a risk that your business needs to be addressing.
Roembke: What risks do you think could drive prices even higher in the second half of the year?
Suderman: Yeah, probably the biggest risk from a production standpoint right now of these crops would be if we see the rainy season and early in Brazil for their safrinha corn crop, since it went in the ground very late, that could dramatically cut supplies from South America. And if that happens, increased demand for U.S. corn at a time when our supplies are dropping.
And also, the other thing would be is we’re starting to see some increased risk based on sea surface temperature patterns in the Pacific, that we could see a short crop in the United States this summer. That’s a higher risk and if you have either one of those or a combination of the two, we could really see explosive prices here in the months ahead with all the money jumping at the chance to trade such a story.
So, if I was a buyer of these ingredients, I’d be very concerned about the possibility of higher corn and soybean prices.
Register for Arlan’s webinar “2021 Commodity Outlook: What is the new normal for feed prices?”
Roembke: Any macro trends you think producers need keep on their radar?
Suderman: Watching inflation rate overall. The Fed has finally acknowledged that we do have some inflation and they’ve raised their inflation outlook for this year to 2.4%. But they still think it’s transitory. If we see inflation get out of hand, then we could see a much more rapid increase in interest rates, which would present some business risks as well, but also attract a lot more money into the commodity sector to try to act as a hedge against that inflation, speculative money.
But be it speculative money, it’s still a risk for those people having to pay the prices for those commodities.
So that’s one of the factors I’m watching, plus those larger weather pattern issues for both South America and North America.
Roembke: What can producers do to better position themselves in the months ahead?
Suderman: Yeah, I think taking a risk management approach to limit your risk exposure is going to be key. There’s a number of ways to do that with a number of tools that are available, but having a plan in place to protect your business operation and the risks that your business faces.
Roembke: Thank you. To hear more from Arlan, make sure to tune into his April 13th “2021 Commodity Outlook” webinar, “What is the new normal for feed prices?”. To register, visit www.feedstrategy.com/webinars.
Also, starting in June, StoneX will launch its School of Futures, an upcoming virtual course where students can gain fundamental, technical and practical knowledge of the commodity markets. To find out more, visit www.StoneX.com.
Thank you so much, Arlan. And thanks to everyone for tuning in.
