Analyst Heather L. Jones, of BB&T Capital Management, speaks about the state of Agricultural Business at present
TWST: At this point in the year, how has business been in the agricultural segment?
Ms. Jones: Robust to say the least.
TWST: Is it because of ethanol?
Ms. Jones: Ethanol has definitely contributed to the robust demand and has drawn much public attention, but there are a number of issues that have contributed. Ethanol clearly drove higher corn demand, which resulted in more acreage being planted in corn this year. Those acres were taken from primarily soybeans, but also cotton, peanuts, etc., resulting in higher prices for those commodities. Although soybeans were in an oversupply situation, sharply reduced acreage has significantly tightened supply, resulting in much higher prices. Wheat has suffered from two very poor growing years. Stocks-to-use is at historic lows on a worldwide basis.
The US growing season was better than last year, but was still subpar. Consequently, wheat prices have soared. However, even with wheat ranging from $8 to $9 a bushel, there hasn’t been any indication of demand rationing. Export volumes are still very strong, which I believe is attributable to inelastic demand.
Going into the planting season, I believe there will be, for lack of a better word, a fight for acreage. Specifically, because of new ethanol capacity coming on next year, more corn acreage is needed, but soybeans need more acreage as well. Further, given current prices, farmers are very likely to plant more wheat.
For the full article with Heather Jones, featuring her full take on the current Agribusiness climate, click here.
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