Commodity Prices – A Long-Term Perspective

Figure 1 shows the combined per bushel prices of corn, wheat, and soybeans since late 2011. It comes from The Heuber Report, provided daily by Dan Heuber, and provides an excellent perspective on commodity prices over the past decade.

It also reinforces the uniqueness of the high prices experienced between 2012-2014 and reinforces a theme heard at the Kansas City Federal Reserve Bank Agricultural Summit last July that agriculture is in a new normal regarding prices for the foreseeable future. In other words, there’s nothing on the horizon like the corn ethanol boom or a dramatic increase in Chinese purchases of soybeans that would suggest prices will bust out of the range they’ve been trading in over the past few years.

Agricultural commodity prices over the last century, adjusted for inflation (real prices), have been consistently trending downward. This suggests the growth in agricultural productivity, or supply of commodities, has outpaced the growth in consumption, or demand. Given current population and economic trends, there’s no reason to believe the trend in real commodity prices will change—a reality producers must face as they work to remain economically viable over the long-term. Producers can respond in a couple different ways. First, producers could decide to continue to produce corn, wheat, or soybeans as bulk commodities and strive to be the least-cost, most efficient producer. Or, they can seek alternative markets, attributes, or means to carve out a niche for their production in order to secure greater value. More and more producers are investigating the second option every day, whether through organic production, or agreeing to produce crops with specific attributes, or other means. In either instance, the trend will require producers to remain vigilant to remain viable.

Figure 1. Corn, Wheat, and Soybean, and Prices Combined

Source: The Heuber Report, Dan Heuber, Jan. 17, 2020