Prepare for More Volatility

August 8, 2011 11:47 AM

Crop price volatility is not going away anytime soon, in fact, it is bound to only increase. “There is more volatility ahead of us than behind us,” says Ejnar Knudsen, portfolio manager, Passport Capital. He spoke at Recognizing Risk in Global Agriculture, sponsored by the Federal Reserve Bank of Kansas City.

Both $4 corn or $12 corn can happen, he says. Furthermore, he says that “China may be more stable than we think.”

He notes that men in China have to buy several apartments to get married and 75% of that is done with cash. He adds that in 18 of the last 20 centuries, China was the No. 1 economy in the world.
Knudsen says that farm debt is not actually that high today. “In the 1970s, there was a lot of volatility in a system with (a high) level of farm debt that we don’t have today.” He adds that it’s important not to make plans based on averages, but to make plans based on the extremes. For instance, “maybe we’re taking for granted that people will trust the dollar.”
He thinks that in upcoming years, a high level of investment globally will flow to U.S. farmland. “It’s a place where we can place our trust.”
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