Spring 2022 Market Update
As I write this message, I am reminiscing about 2021, which can only be described as unpredictable. Whether your metric was commodity prices, land values, equipment values, availability, or even the ominous Covid pandemic, last year was something that can't be compared to anything we have seen in years and hope to not see for many more. We faced multiple different supply issues and shortages in nearly every marketplace. Supply chain issues affected everything from food products to the tools and machinery needed to produce them. Shortages ranged from steel to rubber and grew into plastics and electronic chips. It seemed no matter what the product, there was an input that affected its availability.
As we ended 2020, we were all hoping for a direction in which those markets and shortages would turn. As the economy started to open again, we saw drastic changes in spending. 2021 saw increases in equipment prices and some government payments. Commodity prices and inputs followed suit. We then saw increasing land prices. Rising markets in just about all commodities drove local land prices to county records in several states. Local bidders were willing to pay those record prices as several 3-4 generation farms were now selling farmland that may not see the open market again for many years. As all these markets increased yet interest remained low, we saw competition for land from outside buyers as well. People from outlying areas are looking to diversify from other markets, including the stock market, into land, pushing local bidders higher and higher. We kept hearing about the housing market going strong, but the land market was more robust. In the second half of 2021, we saw some relief in building costs and new homes in emerging markets, but land continued to outshine as perceived as an always "safe" investment.
The most recognizable market disruption for the average producer was the equipment market. New agricultural equipment seemed to be the first to be affected, but transportation assets and construction gear followed soon after. Steel prices were the first to blame. Then, it became hard to get anything new based on the chip shortages. Another catalyst seen in the Ag market was a 5-week strike by John Deere factory employees. Prices continue to rise as many manufacturers can no longer guarantee when equipment will even be available for delivery.
As we came into the year's final quarter, it was plain to see that the cost of farming inputs only rivaled the rising machinery prices. Seed costs are seeing record highs. The average price for Anhydrous Ammonia was over $110/ton in late October. Chemical prices are rising as China shuts down production while the Beijing Olympics are in town. Prices are rising drastically for everything needed to produce a crop, which can make it hard to make ends meet. As long as interest rates stay low, these prices will hopefully be absorbed, but there is talk that the Fed will enact their first interest rate increase in 3 years.
A few things that we can predict for the beginning of 2022 is that markets should remain strong, supply will be a struggle, and prices will continue to rise. The questions are: How high will commodity markets climb? Where is the top for land and input prices? How long will product shortages continue? Will low-interest rates remain? Until supply chain issues are under control, demand will outweigh supply, and prices will continue to rise. The auction market will remain busy as sale numbers continue to be strong. Buyers may struggle to find equipment to fit into their businesses & operations, and they will look to fill those needs in the auction marketplace. 2022 looks to be an exciting year as everything will constantly change in all industries. If you find that piece of machinery or property that your operation needs, one thing is for certain, act fast, as it may be gone before you know it.
Ben Hochgraber, Site Lead
Steffes Group, Inc.