Coffee-shop talk suggests that a fair amount of farmers are reserving a portion of their corn crop for a chance that prices might surge past $8/bu. Last week, I heard talk about one farmer who is waiting for a $10/bu. corn price.
My reaction to such speculation is to be careful what you wish for. Although a short surge over $8/bu. might be attainable this year or next, anything much over that price for any length of time would likely be bad news – even for the corn growers who are able to obtain it.
“Buyers couldn’t afford to keep buying corn at $8/bu. for very long,” says Chad Hart, Iowa State University agricultural economist. “Where possible, livestock producers would shift to feeding wheat, barley, oats – all sorts of stuff. For other corn buyers, such as ethanol plants, they’ll either have to cut back their production, stop production or pass along their higher price to a consumer who will be less likely to buy a more expensive product.”
$10 corn might also bring on considerable social upheaval and public backlash.
“Hopefully, we won’t see $10 corn,” says Hart. “$10 corn has more bad than good in it. Number one, $10 corn puts a match to the fire in the food vs. fuel debate. Secondly, a price that high would cut off the demand for corn pretty sharply, and it might take a long time for the pieces to recover.”
For corn prices to have reached the $10/bu. range, it would also mean that something very bad has happened to reduce production, he adds. “$10 corn only does you any good if you’ve got a crop to sell, but it would also mean that others don’t.”
Such a high price might signal the start of global food shortages – food shortages that typically result in violence. Take the Middle East, for example. A Christian missionary whom I know, and who recently came home from a country close to where public uprisings and violent protests have occurred, tells me that the high price of wheat has had as much to do with these uprisings as a desire from the people to rid themselves of oppressive governments.
There could be some truth in that opinion, confirms Hart. “The Russian wheat debacle last year put world wheat prices really high, and the Middle East is a major food wheat area,” he says.
So no, let’s not hope for $10 corn. Even $8 corn scares me a bit.
On the other hand, corn farmers deserve a chance at a highly profitable year in 2011. Really profitable years don’t happen very often in row-crop agriculture, and consecutive years with high profits have been quite rare.
Yes, I think it’s fine to enjoy the profits you can achieve, while you can achieve them. Still, it’s also good to remember that the world might be as volatile as the prices you receive for what you produce.
Whether you agree or disagree about the pros and cons of $10 corn, I’d be happy to consider your opinion on the topic. When writing, please let me know your name, where you farm or work, what your comment is and whether or not I have permission to use your comment in a future Corn E-Digest newsletter. You can contact me (John Pocock) at: email@example.com.
You're also welcome to write to me if you have concerns or questions about this newsletter or if you have ideas on topics you’d like to see me write about for future issues. I look forward to hearing from you.