The '09 crystal ball
By John Schlageck
Last year farm income hit record highs but projections for this year aren't as rosy. Farm economists expect lower prices this year.
The global recession means a weakening in demand for corn, soybeans and wheat in 2009. The only real strong demand for corn will be ethanol and biodiesel which will drive the demand for beans.
For wheat, there is an excess supply both in the United States and abroad. Stocks are predicted to build for wheat, which should mean lower U.S. winter wheat plantings.
Bob Young, American Farm Bureau Federation chief economist, believes the United States is going through a period of bad news layered on bad news--especially in the jobs front. Young doesn't see a turnaround until the fourth quarter or first quarter of 2010.
Still there are signs the economy may be making a change for the better, the economist says.
A lot of hedge money has moved to the sidelines during this economic downturn, Young says. Finally some of this money is starting to find its way back into the commodity markets.
"As these monies come back, I believe this will be a push to support prices," the economist says. "There may still be some sideways and downward movement."
Recent USDA crop reports verify this.
In the latest release, USDA found a little more corn acreage and bumped yields. USDA also found a little more bean acreage.
There will also be significant downside pressure on the demand side as the dollar continues to hold its value, Young said.
"Just as the declining U.S. dollar last year gave our ag commodities a shot in the arm in the export market, the rise in value of the dollar this year will continue to put some drag on our export markets," the AFBF economist says.
Young predicts corn prices to range from the high $3 level to the upper $4 level. He says the other commodities will adjust off of those figures.
One bright spot of the weak global economy for farmers is fertilizer prices are coming down from last summer's record highs. Continued price softening can be expected and Young encourages producers to delay their fertilizer purchases.
"I even see some black ink flowing in some operations in spite of the sharply lower prices from last fall," Young says.
As revenue assurance products come out this spring, Young suggests producers look to take advantage of some of these program options.
Look to tried and true marketing techniques that have been successful.
"If you can lock in a price (for your commodities) that will cover your costs and make you a little bit of money, do it," Young says. "I don't believe too many producers have gone wrong throughout the years with that kind of marketing strategy."
Another strategy Young believes is essential requires cutting back on spending. He also recommends saving and keeping your eyes peeled for opportunities.
Marketing analysts agree, saying corporate America is a bargain now. Many stocks are closer to their real value than they've been for years.
"There are bargains to be had," he says. "Look closely."
While Young is confident this nation and the world economy will once again get on track, we are not yet out of the woods.
"There are still tough times ahead and we must watch our spending," Young says. "Not just as individuals but as a nation as well."
John Schlageck is a leading commentator on agriculture and rural Kansas. Born and raised on a diversified farm in northwestern Kansas, his writing reflects a lifetime of experience, knowledge and passion.