As I write this post this morning, we are fresh off a recent surge in both corn prices and energy prices, due to a variety of geopolitical and financial causes.
The New Normal for Energy Markets
Quick take-home message: the global energy situation is not going to calm down anytime soon. The phrase “new normal” gets tossed around a lot, so I’m going to jump on that bandwagon too. Energy market dislocations are the new normal. We saw fresh military strikes this week, and I anticipate they will keep occurring, at least on a “tit-for-tat” basis.
Why the Key Players Have Little Incentive for Peace
Many of the key players in this conflict have no real incentive for peace. They are unwilling to sacrifice short-term geopolitical stability for long-term objectives. Remember, Iran does not have to worry about midterm elections. They are fresh off killing over 30,000 (reportedly) of their own citizens during this past winter’s protest crackdown. Hence, after a very bellicose and aggressive funeral procession for their fallen Supreme Leader this month, Iran seems very comfortable continuing down the path of testing the cease-fire, which appears to be collapsing this morning.
What This Means for Agriculture
What does this mean for agriculture? Energy affects everything we do, especially as corn farmers. Fertilizer, fuel, utilities, and our grain itself are all subject to this geopolitical mess.
A Year to Actively Manage Risk
It’s never too soon to begin thinking about how to manage next year’s crop, even while this year’s crop grows in your fields. The take-home message I want to impress upon everyone, as an Agribusiness professor, consultant, and a Nebraska farm kid, is that this is a year to actively manage risk rather than wait it out.
We will talk more about energy over the next few weeks. Pay attention and be prepared to take advantage of what the market offers you as it responds to all of these new developments.
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