b'As we look at climate change, were seeing about 22 timesGenerally speaking, Basse says the crude oil market is head-more floods and two times more droughts, Basse said. This ising towards $100 a barrel, which means increased gas priceshaving an impact on global crop yields. closer to $5 a gallonis still within the future. This change is particularly due to warming poles on Earth,We just dont have enough fossil fuel production, and sup-Basse said. Once the poles warm, the globe loses the vitality ofplies and stocks are still coming down as world demand is ramp-the jet stream. When that jet stream flows down, theres moreing upwards, he said. That high price of energy really causes wetness and more dryness.the whole inflationary thought process to go forward.While new demand drivers and challenges will continue, itsWhen looking at biofuel crops of corn and soybean oilin important to see how these drivers have affected agriculturecomparison to crude oiltheyre relatively cheap. economics this year and in the year to come.In addition, fertilizer prices are at a record high. If I look at spring prices, of nitrogen, I could see it somewhere Inflation a Concern around $1,000-1,100 a ton, Basse said. But if you had to buy a When looking at the banking industry, Basse reported thatnitrogen for application this fall, it was closer to $1,500.theres a bit of an economic quandary. The question that comesThe next six weeks are critical in the fertilizer industry, Basse into mind is: what should the banking industry tackle first?says. Inflation, which is rampant across the world? Creating an eco- We need to get supply moving and moving fast, he says. Im nomic policy to help things like the pandemic and some of thoseconcerned if we dont get fertilizer moving towards the middle of struggles?the country, there will be shortages for our U.S. fertilizers.Central banks are going to err on the hotter, more inflation-ary trends, Basse said. And maybe you and I would like to ques- Corn and Soybean Demand Uption, what is the new natural rate of inflation going forward? Due to the increased demand for feed in China as the Chinese As the pandemic continues, inflation and rising food costshog industry continues to recover and rebuild, feed ingredients, continues to be a global concern. Looking at the UN Foodlike corn and soybean, continue to be high in demand. Indexes, food prices globally have been skyrocketing. Hog numbers and supplies are coming forward data sug-In comparison, though, the U.S. is considered one of the mostgests, Basse said. We can see this in the feed bitChina blessed countries in terms of food costs. Basse reported 6.7% ofimported 29 million metric tons of corn last year. If I add barley, disposable income in the U.S. goes to foodwhich is by far thesorghum, corn byproducts and cassava, you can see that China cheapest in the world.imported about 64 million metric tons this year.We have the most abundance because of you in this room,While China is still producing a big corn cropa record of he said. Food costs are not a good thing in Nigeria, Kenya,272 million metric tonstheir stocks to use ratio is going down. Zimbabwe, India, Turkey or even places like the UAE or Russia. They will continue to be a much bigger driver in world grain Inflation, in addition, is something Basse is monitoring. Hetrade ahead, Basse said. noted that the new natural rate of inflation will be different thanIn addition, due to the low carbon drive, companies like the last decade.Chevron and Exxon are looking to agriculture more. The old inflation rate weve seen is about 1.6%, the Fed hasThey all see for their shareholders that they need to be involved been trying to raise that up to 2%, he said. Youre now lookingin this renewable low carbon deal, Basse said. Everybody wants to at inflation rates that are getting close to the largest in 30 yearshave a low carbon footprintand this is so disruptive.at 6.2%. For every bushel of soybeans through a processor, Basse said Commodity prices are generally telling you what the futureyou get 47.5 pounds of soybean meal and 11.6 pounds of oil. For inflation will beand at least to date, they are still pointingthe future, more soybean oil is necessary. upwards. In the next four years, the U.S. oil demand will double by Basse is concerned about the new natural rate of inflationthese factories that are coming online and running at 80%. We moving away from that 1.6% rate. But, the cycle of inflation isntgo from 25 billion pounds to nearly 50 billion pounds, Basse done yet.said. This is a big deal. There is a lot of economic incentive to The good news though, he said, is that the U.S. dollar is rally- produce renewable diesel.ing, which helps the ratio within the U.S.In the end: Basse says the price of soybeans will be relative to As we get closer to $30 trillion of debt, my worry about theample soybean supplies, and the U.S. will come down relative to value of the U.S. dollar in the second half of 2020 started to rise,the price of corn. Basse said.As we look at farmers going forward, there will be some that still look at the opportunity to plant corn relative to beans just Biofuels and Fertilizers where the margins are sitting even though the costs are high, The price of oil continues to rise, and Basse noted in Chicago,Basse says.SWyou could see prices sitting at $4.50 to $4.60 a gallon. 14/ SEEDWORLD.COMJANUARY 2022'