Homestead mailing list

[bobf <bobford79 AT yahoo.com>]

I suppose this story is more about 'big ag', but I still found it 
interesting.  The man featured in the article really has farming in his 
blood.  There are links to vis and pics within the article.  I heard on the 
business news yeaterdy that all agricultural commodities have fallen 
significantly except for one --hogs.  The reason is that they were so cheap 
last year and corn and grain was so high, farmers sold off their enventory 
for slaughter.  Now, there is more demand than supply.  I still bought my New 
Years Day Farmer John ham for 78 cents per pound.  It has water added like 
almost all hams doo today, but it is still a decnt tasting ham for the price. 
 I would prefer a dry smoked Virginia ham, but I can't always have what I 
want............................

------------------------------------------------------------------------



 
DECEMBER 30, 2008

 Bumpy Crop: Farming's Sudden Feasts and Famines 

As Grain Prices Rise and Fall and Perhaps Rise Again, Growers Struggle to 
Navigate a New Age of Volatility and High Costs
 
Jesup, Iowa

Benjamin Riensche has just come off two of his best years in farming. But 
like growers all over the globe, he is in the midst of a more turbulent era 
of sharply rising and then suddenly falling prices.



Danny Wilcox-Frazier for The Wall Street Journal


Farmer Benjamin Riensche, pictured with his son Hans, is being squeezed by 
high costs and up-and-down grain pricing. The 47-year-old former banker fears 
he may face his first financial loss on his family farm.
Now the 47-year-old, who grows corn and soybeans across 10,000 acres in Iowa, 
fears he will incur losses in 2009 that would be his first red ink in 16 
years. His revenue is falling, but the costs of seed, fertilizer and 
machinery have remained high. Mr. Riensche bought most of his supplies months 
ago, when grain prices were still high. Many of his suppliers are still 
trying to pass along the higher costs they absorbed in recent years for 
everything from metal and chemicals to natural gas. To lower his costs, he 
could idle land, but figures raising a crop at least gives him a chance to 
benefit if prices move back up, as some predict.

"I never thought the stakes could get so big," Mr. Riensche says. "We've gone 
from the nickel slots to world-class poker."

All this is happening even though the world has been producing more grain 
than ever. Demand has grown faster than farmers could increase their 
production most years of this decade, helping to drain grain reserves. 
Unusually good weather in most of the world this year is refilling grains 
stocks once again. But the situation could easily change. Some economists 
worry that the world will consume more grain than it produces by 2010, 
particularly if oil prices recover enough to make the production of ethanol 
from corn more profitable again.

The Food Crisis
Complete Coverage: News, video, photos, moreThe 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.

The two-and-a-half story, red-brick Georgian is roughly three times the size 
of the Reinsches' cramped, 1,130-square-foot home in town, where their four 
children share two bedrooms. Within a few weeks, the girls and a boy will 
each have their own room.

"For a long time, I figured our standard of living had slipped behind where 
we would be if I had stayed in banking," says Mr. Riensche, who earned an 
M.B.A. from the University of Chicago, then worked for Swiss Bank Corp.

He returned home in 1993 to run the family farm after his brother died in a 
harvest accident. For many years, U.S. farmers received about $2 per bushel 
for their corn, so close to their break-even point that they depended on 
federal farm subsidies to stay in business.

"Only in the last few years were we able to catch up," Mr. Riensche says.


View Interactive

The Ongoing Food Crisis
See how grain production compares to consumption in countries around the 
world.


The boom hit home for him in 2006, when a new energy law forced the oil 
industry to blend billions of gallons of ethanol into motor fuel. Dunkerton 
Co-op, which buys Mr. Riensche's crops, suddenly began supplying half of its 
members' corn to the ethanol plants sprouting around the farms he works with 
his father, Roland, 78.

At the same time, the world's appetite for U.S. corn, soybeans, wheat, pork 
and poultry was steadily expanding. Demand was so great that even the June 
flooding that inundated nearby Waterloo and Cedar Rapids -- delaying Mr. 
Riensche's planting season by nearly a month -- didn't dent the farmer's 
optimism.

With grain stockpiles already perilously low, grain buyers panicked that the 
world might run out. Speculators helped drive prices skyward. The Dunkerton 
grain elevator bought some of Mr. Riensche's corn for three times what he 
typically has collected: $6.24 a bushel.

In July, the weather turned ideal for growing, leading to the U.S.'s 
second-biggest corn crop ever. But as harvesting began in September, the Wall 
Street meltdown fueled fears that a global economic slowdown would chill 
foreign demand. Then, in October, the sibling source of demand -- ethanol -- 
took a big hit. Ethanol giant VeraSun Energy Corp., owner of a plant in 
nearby Dyersville, filed for protection from creditors under Chapter 11 of 
the federal bankruptcy code. Corn prices plummeted further.

"Who could believe prices could rise that high or fall that fast?" said Mr. 
Riensche as his 12-man crew raced to finish a field before a November 
nightfall. Every 20 minutes, a semi-trailer hauling 1,000 bushels of corn 
lumbered down the road to an ethanol plant paying him about $4 per bushel.

Not long ago, Mr. Riensche would have been ecstatic to get that much for his 
corn. But his suppliers and the owners of the land he leases jacked up their 
prices to cash in on the grain boom. His seed costs for next year are jumping 
33%, and his fertilizer bill is more than doubling. Hog producers who used to 
pay to have manure removed from their barns are now making corn farmers pay 
for its value as fertilizer.

Mr. Riensche figures it will cost him close to $5 to grow a bushel of corn 
next year and about $11 to grow a bushel of soybeans -- not good with prices 
where they are at the moment. Taking their cues from the Chicago Board of 
Trade, local buyers are offering about $4 a bushel for corn that farmers 
promise to deliver next year, while soybean processors are offering about $9.


Ethiopia is facing a food shortage and now relief agencies are making tough 
choices on who gets fed. WSJ's Roger Thurow reports.
Federal subsidy checks aren't likely to help U.S. farmers as much as they 
once did. Corn and soybean prices are still above the levels that 
automatically trigger price-support related checks from the government.

The chance of red ink returning to the Farm Belt is prompting rural bankers 
to tighten their lending standards, which could force farmers to draw down 
their savings in order to stay in business. Bankers already expect some of 
their most indebted farmers to get out of the business next year.

"There's a phenomenal change in the whole structure of the farm economy," 
says Shane Tiernan, a business development officer at Grundy National Bank, 
Conrad, Iowa, which lends to hundreds of growers. "We've never seen farm 
incomes swing this dramatically before."

Quitting isn't an option for Mr. Riensche. Unlike many U.S. farmers, he has a 
child who wants to follow in his footsteps. "My dad is a pretty successful 
guy," says nine-year-old Hans as he plays in his father's shop with his model 
farm.

"We are taking a big leap of faith," Mr. Riensche says as hunches over his 
personal computer, staring at commodity price charts. "We are praying for a 
change in the markets."

http://online.wsj.com/article/SB123059685167541039.html