Field Crop Margin Outlook: 2021 – Higher Prices Lift Margins and Global Spirits

In 2020, field crop farmer margins largely benefited from higher global commodity prices in the second half of the year. “The 2021 outlook depends largely on macroeconomic recovery, as it dictates fuel, food security, and animal protein industry demand,” according to Elizabeth Lunik, Analyst – Farm Inputs. G&O demand has proven to be resilient, and the future of Chinese imports will be important for G&O prices, as will be the magnitude of La Niña’s negative impact on South American crops, the outlook for multi-year low US stock levels, and the recovery potential of US planted acres for 2021.

Higher margins are expected in 2021:

· In the US, higher soybean and corn prices (+40% YOY) will boost 2021 margins. 2021 Kansas wheat farmer margins will also benefit from higher prices.

· Brazilian farm margins will further improve, due to continued currency devaluation and high global and domestic prices. Watch for La Niña weather risks in Q1.

· Argentine 2021 gross margins are estimated to increase to a decade-high, assuming current future contract prices and despite lower yield expectations caused by La Niña effects.

· In Europe, margins will improve due to higher (wheat) prices and production. France, the UK, and Romania expect higher 2021 margins and harvest volumes. Dutch margins will partially improve in 2021.

· In Australia, margins are expected to recover in Western AU, due to higher production, and in NSW, as local prices are still above the five-year average.