Very few people would've ever thought that 2008 would end in the fashion it did. After going to all-time new highs in grain prices in June, corn prices for the year actually finished down 14.5% from where they started and soybeans down 20.6%. Not a real good year if a person got caught on the wrong side of this market.

Most amazing was the abrupt change in trends that occurred in 2008 - and we could be looking at the same in 2009. Looking back over 2008, there are some important observations of events that will change our lives forever. Consider:

  1. The world financial meltdown was similar to the 1980s agriculture meltdown. Both were fueled by excessively high debt. The debt-fueled consumption patterns of the last several years will now be replaced with thrift. As U.S. consumption declines, a new driver will be needed to propel the economy upward.

  2. The recession will be long. Unemployment will continue to rise and even though the housing market might bottom in 2009, there won't be much of a recovery from the bottom.

  3. A political shift to the left is inevitable. The public's disillusionment with free markets will result in the pendulum swinging too far in the other direction.

  4. Financial markets will become more heavily regulated. While necessary, increased regulation will slow growth.

  5. Confidence in the stock market by investors has been shattered. Investors will become more conservative. The Golden Era of the financial sector is over.

  6. Deflation - not inflation - will be the unwritten rule. Even though more money is being printed, the ignition to light inflation has to come from consumer spending, and it will take a long time to turn attitudes.

  7. Interest rates will stay low. Inflation is not going to be a concern. Money supply is large and demand is weak.

  8. Fuel prices will stay low. Demand is down and supply is up. The index funds that drove this market sharply higher have also seen their capital erode and will not be around to provide another leg up.

  9. Attitudes within the general public have changed remarkably and will impact spending and investing for years to come.

  10. The stock market will be stronger than anyone expects. Even though the economy will remain weak, that news was discounted in stock prices during the fourth quarter of 2008. For the coming months, there will be more upside potential than downside risk.

IN SUMMARY

Agriculture, while in 2008 didn't end as positively as many expected, still fared much better than the general economy. The economic collapse was not near as brutal to farmers as it was to our city cousins, who in many cases saw their net worth drop by 50% or more during the past year.

This is truly a year that will go down in the history books as one with the most profound economic impacts of any year in history.

The real estate boom peaked in 2006 with the hysteria that the real estate market could not go down. Unfortunately, the same type of hysteria hit agriculture in the first half of 2008. Markets are never exactly the same, but people never change, and no matter what the market, they always move to extremes.

More on the impact in agriculture in the next issue.

Richard Brock is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report. For a trial subscription and information on Brock services, call 800-558-3431 or visit www.brockreport.com.