by PressHuge profits await crop producers
What the huge profits in the agricultural sector are related to
Despite all the turmoil, 2020 was a good year for the agricultural industry. Thanks to an increase in grain prices on the world market, the profitability of farmers’ labor increased significantly, which stimulated them to expand their allotments. Huge profits are expected this year as well.
In the 5 years leading up to the 2019/2020 season, total world trade in grains and oilseeds increased by 120 million metric tons, averaging an increase of 3.5% per year. At the same time, the price potential for grains increased, and combined with the global trend of increasing sales, prices soared by 17%. Analysts note that a similar situation will be observed in the future, helped by population growth. Not surprisingly, this outlook has reassured members of the agricultural industry. And they tend to increase the volume of production.
This year, profitability levels are predicted to increase in a number of countries. For example, the U.S. is expecting a significant increase in margin thanks to the high cost of soybeans and corn, which rose in price by 40%. In Brazil, global processes are supported by domestic ones as well. The devaluation of the national currency contributes to increased exports and farmers are expanding planting areas to maximize profits from the current situation. In this case, however, weather intervened — heavy rains during the pollination period reduced the projected yields. To compensate for the losses, local farmers are actively using mineral fertilizers, the consumption of which this year reached record levels.
Brazilian soybean prices surged 80% in May compared to the same period in 2020. The increase is supported by an increase in SWOT quotations. Corn was up 129%. As for export shipments last month, Brazil posted a record 17.4 million tons, up 17% from a year earlier. Soybean shipments are down slightly from 2020, but still at a high level.
Argentina is also optimistic. Here, gross margins are projected to increase to a decade high. High contract prices contribute to this.
As for the European Union, here the profitability is due to the cost of wheat and the increase in its production. Good yields are promised in Romania, France, and Great Britain, which will increase profits.
In Australia, the average price is higher than in the past 5 years. Profitability in the country is increasing due to increased production in several large agricultural regions.
Last year, a surge in demand for crops from China caused a furor on the global market. Analysts warn that the increased interest of Chinese farmers will continue in 2022.