MarketWatch published an article last Friday which highlights a controversial new report coming out of Canada: high corn prices over the summer were directly linked to speculation, not ethanol. While most critics were quick to blame ethanol for the high jump in corn prices, an independent company called Global Insight has issued a report stating that commodities speculation rather than ethanol production was the cause of the spike in corn prices.
MarketWatch goes on to point out that while the US corn rose to above $8.00 per bushel, Canadian corn prices stayed under $4.00:
Ethanol production in Canada is up, and yet the price of corn is now at a more moderate levels. Ethanol cannot now stand as the cause of food prices increases - the facts don't support it," said Gordon Quaiattini, President of the Canadian Renewable Fuels Association. "We have always maintained that record oil prices and speculators were to blame for the increase in the price of food this summer.While most of America waits for the lower corn prices to translate into lower grocery prices, the drop in price per bushel does not mean things are getting easier for American farmers. USA Today reports:
Speaking of that credit outlook, MSNBC has a report on the agricultural sector and the credit crunch:Schnitkey says it will cost corn farmers in central Illinois about $4.02 on average next year to produce a bushel of corn. Fertilizer, seed, energy and land prices have risen sharply, though lower oil and diesel prices could ease the pain a bit.
David Kappelman, senior vice president of the Premier Community Bank in Marion, Wis., says farmers are holding off buying fertilizer for next year in hope that prices will come down. That may not happen, given that suppliers were forced to lock in inventories early. He expects the credit outlook to come into focus early next year as suppliers start pressing farmers for commitments.
"Agriculture is cyclical. We've had a pretty good run, and that run might be behind us," Kappelman says.
Everyone from crop farmers to livestock producers will be paying more for money they borrow on top of production costs which have been climbing in the past few years.Has the credit crunch affected your business? Do you think farmers will just have to adjust to the new corn economy after years of high profits, or will the market even itself out again? Comment below and let us know your feelings."I would say that everybody's pretty cautiously concerned," said Don Langston, a longtime cotton producer in Texas, the nation's leading producer of the fluffy fiber and the nation's No. 2 agricultural state.
Agriculture economists say farmers will simply need to adjust, whether that means looking for operational efficiencies, selling assets to raise cash or purchasing crop insurance to make sure they can repay loans.
There is a bright spot in all this for meat eaters, economists said. An anticipated decline in demand from overseas means there should be plenty of beef, at reasonable prices, for U.S. consumers.
Further Reading:
The Cattle Network on how consumers are willing to spend more money for premium meats.
The Cattle Network on livestock highlights.
The AP on Ag futures for Monday.
