In my 30-plus years of visiting with farmers and writing about agriculture, I have never seen anything comparable to the cropping choices growers have in the Southeast in 2008.
Any choice of crops is at or near 10-year high prices and for some of the grain crops the high prices seem fairly stable for at least a couple of years.
Even with dry fertilizer pushing $600 per ton, labor expensive and hard to find and diesel fuel around $4 a gallon, farmers should do well with their 2008 crop. Well that is barring floods, droughts or other natural disasters.
How long will these good times last? That's a good question. One that most everybody in every sector of agriculture wants answered. My best answer is to watch the value of the U.S. dollar. As long as it's weak some of the prices in some of the commodities will likely stay high. If the dollar strengthens, watch out!
As long as prices stay high for commodities, you can bet prices at the grocery store will continue to escalate. Already in the first quarter of 2008, leading food indexes are showing a 4 percent to 5 percent increase over the same quarter in 2007.
You can bet no farmer wants to see food prices escalate beyond the means of all American consumers. Likewise, food manufacturers and wholesalers don't want food prices to skyrocket. Other than investment bankers and stock portfolio managers, few people benefit from over-inflated prices for commodities or food.
Unfortunately, the American public is likely to point their wallet-weary fingers in only one direction when they purchase record high priced food items. You know where the blame will be placed — on the farmer who grew the crops that made the food.
It is the most unfortunate and undeserved blame imaginable. The American public doesn't understand that grain prices, for example, paid to farmers has been too precariously low for all but the most efficient growers to stay in business for the first few years of the new millennium. They don't understand the direct relationship between escalating oil prices and escalating input prices for virtually everything a farmer uses to make a crop or raise livestock.
We in agriculture do an outstanding job of talking to ourselves, whether we speak as commodity organizations, agri-business companies, or farm magazines. Perhaps we could all benefit from training our respective guns on the American public to let them know the bitter truth about fuel and food prices.
Truth one is neither ethanol from corn, nor biodiesel from soybeans is going solve our dependency on fossil fuel and the high price tag that follows this energy. Farmers didn't create the furor over corn for ethanol that has helped fuel the high cost of corn and subsequently soybeans and wheat.
Cheap fuel is a long-gone relic of the good ole days. You can pick a time prior to now to decide when those good ole days were good for you. If you follow increases in food prices worldwide and compare these to high fuel prices worldwide, you will see a definite trend. Few, if anyone expects gas prices, or any fossil fuel product to go down significantly in price.
Truth two is that cheap food is just as gone as cheap fuel. Wheat prices will likely cycle back to 1998 levels, but you can bet the price of a loaf of bread won't follow that trend. Likewise, the price of corn, soybeans, potatoes, peanuts — you name the crop will also cycle back downward as world supplies fluctuate. Again, you can bet the input costs a farmer pays, not even counting diesel fuel, won't go back down to pre-2006 levels.
As an ag economics friends says, “We have all the elements for a perfect storm from which too many farmers won't survive.”
I'm a bit more optimistic in my prognostication, but I do think agriculture stands to take an undeserved black eye for escalating food prices. And, I don't think it has to be that way — not if we all band together to keep the American public well aware of the real factors that have led to high food prices and that are quite likely to lead to unprecedented costs for food in our country.
Farmers didn't create a middle class in China that is larger than the entire population of the United States. The Chinese middle class, like the American middle class wants to have cars and boats and eat high quality food. And, like middle class Americans they have the money to do these things. Unfortunately ‘these things’ are in limited supply.
Neither did farmers create a weak dollar that makes U.S. grown commodities affordable in many countries in the world. Nor did we invest billions of dollars in the commodity market to artificially raise prices of wheat, corn and soybeans, subsequently raising the cost of the livestock that grows on these commodities.
Don't be surprised if one consumer group or another calls for a boycott of food products containing wheat or corn or soybeans. And, don't be surprised if their ire is aimed more directly at farmers than at the real culprits who created this high priced dilemma.
Surveys have repeatedly shown that Americans like farmers — it's farmING they don't like. When consumers start paying $15 to $20 for a pound of ground beef and $8 to $9 for a gallon of milk and comparable high prices for virtually every food item, farmERS will likely be thrown in with farmING in the eyes of the unknowing American consumer.
A distraught American public is not good for any target. Politicians, those people who directly affect trade and tariffs and institute embargoes and price ceilings, listen to distraught voters. Already some agricultural leaders contend the results of legislation dealing with greenhouse gases will more directly affect farmers than the next farm bill. That's a scary thought!