Market clarity removing risk premiums for crops


Market clarity removing risk premiums for crops

An ag economist says USDA’s recent global supply and demand report provided a little bit of market clarity for the first time in months.

Texas A&M’s Mark Welch tells Brownfield the lack of a major disruption in the report is dragging on markets.

“We’re seeing some of that risk premium that’s built into these markets,” he said. “Where prices are significantly higher, for corn and for wheat specifically, above where you would expect them to be given our supply and demand numbers.”

All nearby crop futures closed more than $.40 lower following the USDA’s report Tuesday.

Welch said a shift toward steadier markets hasn’t been seen since fertilizer prices starting rising last year.

“We obviously knew that was going to stress farmers’ profit margins,” he said. “What were they going to plant based on the risk around the availability of inputs, particularly fertilizer, and then the cost; then, obviously, Russia invades Ukraine.”

He said the market’s focus now turns to weather.

Mark Welch Interview