Rising costs in arable farming force crop shifts

Costs are soaring while grain prices are not rising enough. That is putting pressure on arable farming. The French grain lobby Intercereales warns that this puts the viability of some farms at risk and that growers will have to adjust their crop plans. Maize in particular is losing favour as a relatively expensive crop and as a crop that still has to be sown. A similar trend can be seen in the US. Wheat growers in the south of the US are also dealing with drought.The May contract for wheat on the Matif closed yesterday €0.75 higher at €204 per tonne. On the CBoT, wheat closed 10 cents higher at $5.97¾ per bushel. Maize made a similar move and closed 1.7% higher at $4.67¼ per bushel. Soybeans are still lagging slightly behind grains, but still closed in the green with a gain of 8¼ cents to $11.71¾ per bushel.Unrest in the Middle East is adding to market volatility in the grain market. The 15-point peace plan for Iran initially put pressure on the oil price yesterday and also weighed on grain markets. Later in the day, Iran announced via state television that it did not take Trump's plan seriously. After that, the oil price rebounded somewhat and other commodities followed in its wake.At farm level, the higher gas oil price and more expensive fertilizer are the most noticeable cost drivers so far. With an eye on the higher costs, arable farmers are likely to make different choices in their crop plan. Earlier this week, organizations in Australia sounded the alarm. Yesterday, the French grain lobby Intercereales said that in France some farmers are struggling to stay financially afloat. The general director of Intercereales Benoit Pietrement told Reuters yesterday that the continued existence of some farming businesses is at stake due to the increased fuel, gas and fertilizer prices. Farmers on the great plains in the north of France were reasonably well covered (with fertilizer), but in the south, where more maize is grown, less fertilizer has been secured and I hear that farmers are replacing maize with sunflowers.Sunflowers require less nitrogen and are therefore partly cheaper to grow for the arable farmer in southern France. In 2022, shortly after the Russian invasion of Ukraine, French farmers also switched to sunflowers at the expense of maize because of the high fertilizer prices. According to Pietrement, this year could well become the most challenging year ever for farmers. Fertilizer and energy have become much more expensive while the grain price has hardly risen. That is a big difference from 2022 when the possible absence of Ukraine from the world market drove grain prices up.Low returns in arable farming could also have an effect on the acreage for the 2027 harvest according to Pietrement. Farmers could choose to leave more land fallow and rely more on subsidies from Brussels.Not only in France do arable farmers see it as a big gamble to plant a relatively expensive crop such as maize. In the US, some analysts expect less maize to be sown. There, however, soybeans are mentioned as the alternative crop instead of sunflowers.A bright spot for the American arable farmer is that bio-ethanol is benefiting from the high oil price. In the US, E15 petrol may now be sold in the summer months, the Environmental Protection Agency (EPA) announced yesterday. That measure is partly intended to bring down the petrol price in the US and could cause demand for maize from the 2025 harvest to increase somewhat in the coming period. Wheat is also getting some support from the weather on the southern prairies in the US. It is already relatively dry and over the next ten days there is little or no rain in the forecast for the area. In addition, warm weather for the time of year is forecast, combined with a strong wind. Those are far from ideal conditions for wheat growers in states like Kansas and Oklahoma.