Now I have to admit that this is rather unscientific, but we've been surveying farmers at a series of meetings that we're just wrapping up. We're asking them what poses the greatest risk to them in the next 5 years. These meetings have been all about getting farmers poised for the future. So we've got them in the mindset to think about what they need to work on. And hands down, the leading answer has been commodity prices.
There's no doubt in my mind that this has a lot to do with volatility. Think back 10 years and we had a completely different picture when it came to what caused farmers real heartburn. Long gone are the days of the LDP. While it feels better getting our profit from the market, this adds a whole new set of risks. In basic economics, why would higher prices equate to bigger risks? Higher commodity prices equal higher everything-else prices. And for those outside of agriculture, who still impact it – it creates something of a misunderstanding.
If the price you can get for your corn is higher, the price you're going to pay for your seed and fertilizer and cash rent automatically goes higher. Everybody wants a piece of the action.
Here's where the risk comes in for farmers. What determines the price of corn?
Ethanol, sure. What determines the continuation of ethanol demand? Congress.
What else determines the price of corn? Feed use. And when we talk about continued feed use – that's complex. Consumer demand for meat plays a role, the size of the breeding herd, even the drought in the southern plains.
Another factor in corn demand: Exports. What plays into export demand? Global prices, global weather, everybody else's economies and policies around the world. So each time you follow the train of demand, you end up with factors that are fairly volatile.
No wonder farmers feel like commodity prices are risky. Many of these factors can change at the drop of a hat. To take advantage, you need to be on top of things. You have other work to do. So let's talk about being stressed by things you can't do anything about. It's futile. Think instead about what you can do. You can have someone in your operation completely dedicated to following markets, or you can find a consultant to help you with this. Those are two ideas. It's your time and stress to manage.
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