I grew up on a farm in the midst of the huge soybean and corn fields of central Illinois. My mothers dad was a farmer, my dads grandparents were farmers. We lived on a farm five miles from town.
Farmers have a tendency to complain….they complain about too much rain, not enough rain, prices too high and prices too low. They complain they are broke but they are seen buying a new half million dollar combine and a new Cadillac every year. In my opinion, the Farm Bill was the largest welfare program in the country, only behind the TARP bailout these days.
Why do farmers have so much power? Iowa is why. There is a reason Iowa is the first Presidential stop, and it is also a reason why any politician that ever wants to run for President has to support the Farm Bill.
In the last two years we have seen corn, soybean and wheat prices at levels never seen before. Farmers made an absolute fortune off their crops, and they saw their land prices appreciate 50% or more. Now, farmers are back to complaining because commodity prices have fallen and they are going to have to tighten their belts again. They could have hedged their crops back when prices were high, but they got greedy. They thought prices would keep rising, and they didn’t.
The situation is a headache for farmers even though it can mean years of big profits. Commodity prices are changing more quickly than farmers can plan which crops to grow. The price of a bushel of corn rarely varied by more than a dollar in a year’s time for most of the 1980s and the 1990s. But this year, many U.S. corn farmers have seen the price of their crop swing by $4 a bushel.
The rapid change in the fortunes for Mr. Riensche is not uncommon for farmers around the world, who are experiencing an unprecedented era of volatility. After prices of crops peaked in the summer, bumper crops recently helped reduce prices, dousing the anger behind riots in nearly 60 countries. But crop reserves remain unusually low while demand continues to grow. That means the slightest disruption — flooding, drought, disease, or extra-cautious farmers — could have a much bigger impact on prices than it would have had in recent decades.
“There’s no cushion,” said Daniel W. Basse, president of AgResource Co., a Chicago commodity forecasting concern. “It’s a very volatile situation.”
Successful farming is partly about divining future demand, which has been high as new consumers emerge around the world. Mr. Riensche’s corn and soybeans flow into a U.S. commodity sector that fattens livestock for Asian consumers, fills food-aid cargo ships to Africa, and supplies corn-fed ethanol plants in the Midwest. Just last year, his Blue Diamond Farming Co. saw its profits double into the six figures. Hearing agricultural experts predict a decade of strong crop prices, Mr. Riensche felt confident enough to build a new home on the site of the farmhouse where his father was born.
My Grandfather had an addage that made him a successful farmer……buy low, sell high. The farmer in this article complains that his costs for corn will be over $5 a bushel, and if that is the case, he needs to go out of business. This is all a big runup to the farmers asking for a new farm bill that will readjust those subsidies up from their previously lower levels. Sit back and watch.