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Uncertain timesAgriculture is a cyclical industry. That statement is as obvious as it is painful. It remains true throughout countless gyrations, with each up and down move taking out a portion of the producers of every commodity. In the period that started somewhere around 2001, the value of livestock and grain has gone through a major rise and a steep drop. The equity added by some farms has been substantial, especially with the increase in the value of cropland. But the fall in the livestock industry has been so great, and so prolonged, that the entire structure of the system could change. It is still uncertain as to who the survivors may be: large and specialized or relatively small and diversified. It also may be time for agriculture to return to Washington, D. C., with a request for a safety net to keep producers from surrendering their equity and exiting during bad times. The traditional farm programs have expanded production of defined program crops: corn, wheat, rice and cotton. Through the years, soybeans have become an integral part of the mix, as the rotation with corn, and the export value, expanded their acreage from the Delta to the Northern Plains. A cycle, in agriculture, has to have an event to start or end it. In the past eight years, the ethanol phenomenon expanded the use of corn and disrupted the cheap grain supply for livestock. The threat of a crop shortage, in 2008, spiked prices to all-time highs. Now the payback comes, as production costs have gone up in a recessionary economy, and makes the downturn even more severe. In the pork sector, the lack of consumer demand and the H1N1 flu scare seem to have been the worst combination possible for a market that has been losing money since 2007. In dairy, the plummeting demand for milk and cheese pushed prices far below the cost of production. World Dairy Expo was called an escape from reality by some producers who attended. The word back was that no one is making money and herd liquidation is moving so slowly that no relief is in sight. In the pork industry the same scenario seems to be in effect, except for contract producers who work for a fee and hope their integrator stays in business. Is it time to go after government stimulus money before a large portion of the livestock production sector fails? Is it realistic to ask Congress for a new and higher safety net under commodity production? The Wall Street Journal (October 6, 2009) carried a front page story about European farmer protests against low milk prices and emergency subsidization of dairy farmers in the EU of up to $22,000. Reality is: that agriculture's economic woes are not causing problems for consumers. There is too much supply, rather than too little. Sizable margins remain for the wholesale and retail sectors, and consumers with jobs are coping with the current cost of food. As long as the consumer is happy, the government is happy. Also, not all farmers and livestock producers are in trouble. Bankers indicate that agriculture is still a good place to put their money. Farm and ranch land prices retreated over the past year but not nearly like other investments linked to Wall Street. The contract high for expiring corn and soybean contracts is still over $7 for corn and $15 for soybeans if farmers had the nerve to lock it in during the floods of last year. Economists say that pork and fed cattle prices will recover next year if the economy recovers. That's a tall order if it is left up to a gridlocked Congress. Or perhaps, the business world will sort itself out without Washington's intervention. Generally, restating the words of former Kansas Senator Bob Dole, "Congress had better get something passed to help the economy before this recession is over!" Without further upheaval, the recovery in livestock prices is expected to take place by the second or third quarter of 2010. When times improve (and they will) who will be left? Will government change its food policy to decrease the severity of future downtrends? My answer: Probably not, as the tendency in agriculture is to overproduce and even though the number of farmers and livestock growers continues to decline, the supply of food remains large. Editor's Note: This is Ken Root's 35th year as an agricultural reporter. He grew up on a small farm in central Oklahoma and started his career as a vocational agriculture teacher. He worked in Oklahoma, Kansas and Missouri as a broadcaster and was the original host of AgriTalk. He has also been the executive director of the National AgriChemical Retailers Association in Washington, D.C. and the National Association of Farm Broadcasters in Kansas City. Ken is now the lead farm broadcaster at WHO and WMT Radio based in Des Moines, Iowa. He has been a columnist for HPJ and Midwest Ag Journal for eight years.
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