Sep 01, 2011
The “dog days of summer” are almost behind us. Harvest will be picking up steam as we go into the fall. We already know that, as a nation, our total production is going to be disappointing. We won’t be adding to our reserves this year. Corn, soy beans, cotton, and wheat – they all compete for acres and they are all coming up short.
What does all this mean? We have already witnessed record prices and wild price volatility. That’s going to be with us until we raise a big crop. The next chance for a big crop isn’t until next year.
The public is voicing concern about the rising price of food. Never mind the fact that they were spoiled for 30 years when the price of corn stayed in the $2.00-$2.50 per bushel price range. Not anymore. The future norm may not be $7.00, but it won’t be $2.00 either.
Rising food prices will continue to fire up the debate of food versus fuel. The ethanol subsidies that expire this year are not likely to be extended. Cattle prices and hog prices have been strong but I don’t expect those industries to expand. The cost of feed will put the brakes on. The broiler companies have not enjoyed profitable prices because we have too many chickens. On the positive side, most of the livestock industry has adjusted to the higher priced feed.
As you can see, these historic grain and soy bean prices, although exciting if you are a farmer with a good crop, generate a whole host of other concerns.
When it’s all said and done, there are some major pluses.
First, if you raise a good crop or have the hogs or cattle to sell, you’re going to make some money to pay down the mortgage.
Second, we already know that if we just let the market work, farmers will respond and produce more. We always have. And then these historic prices will fall back at least some.
Third, the short crop this fall all but guarantees a reasonably good price for next year’s crop.
This is a wild and uncertain business to be in, but is there anything more important than food? Maybe water.
Have a safe harvest.
In closing, I would encourage you to access my website which archives my radio commentaries dating back 10 years and will go back 20 years when complete. Check on what I said back then. Go to www.johnblockreports.com
Until next week, I am John Block in Washington.