Volatility Ahead for Agriculture

March 12, 2009 07:00 PM

Sara Muri, Farm Journal Business & Crops Online Editor
Following the roller coaster ride of 2008, farmers and economist alike are apprehensive about the upcoming farming season. Will 2009 be an encore?
Pat Westhoff, research associate professor and co-director at the Food and Agricultural Policy Research Institute - University of Missouri, says it is beneficial to look at drivers behind last year's roller coaster.
"Almost every single factor that made prices go up in 2007 and the first part of 2008 has reversed itself, almost without exception,” Westhoff says.
He cites the following reasons for why prices rose:
  • Reduced production in Europe and Australia
  • Economic growth in Asia and elsewhere
  • Weaker dollar
  • Higher petroleum prices
  • Rapid biofuel expansion
  • Policy response
  • Speculation
Here are the reasons, according to Westhoff, why prices fell
  • Sharp  increase  in  global  grain  production  in  2008
  • Financial  crisis  and  world  economic  slowdown
  • Stronger  dollar  
  • Lower  petroleum  prices
  • Slower  biofuel  growth
  • Policy  response
  • Speculation
"Continue to expect lots of volatility ahead for us,” Westhoff says. "You conceivably have circumstances where corn prices go below $3.00/bu. or have circumstances where corn goes above $6.00/bu., even this year.”
Listen to Westhoff's predictions for this year:
Westhoff spoke March 11 during the Missouri Agriculture Outlook Conference in Jefferson City, Mo.

You can e-mail Sara Muri at smuri@farmjournal.com.

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