The FW study tour of the American Mid West has just passed through Illinois and Iowa and are at present in Minnesota. When we called in at the Chicago Board of Trade a few days ago there was little excitement in the open outcry trading pits compared with what had gone on there for the last few months. Prices were relatively static as traders adjusted to levels twice as high as they had been twelve months before. It was a bit like home really except that this was where new levels were established that affected values across the rest of the world.
There was much more activity in the oil trading pits where crude peaked at $135/barrel this week. The knock-on effect this will have on fertiliser costs and virtually everything else needed to produce food had not yet transferred itself to the agricultural sector of the market - but it will.
As we travelled north and west from Chicago we called on several farmers. Most grew corn (maize) and beans (soya) and not much else. All complained that the spring had been wet and cold and that land work was at least three weeks behind normal. They didn't define what this might mean in loss of yield but reductions there will be compared with optimum planting dates. But its been dry enough this week to get on the land and big tractors and huge drills kicked up clouds of dust on fields either side of the road as our coach traversed the never ending black soils.
But high prices for both maize and soya were not filling US farmers full of confidence. Yes, of course they were pleased with the returns they were getting but they were also glancing nervously over their shoulders at the costs of establishing crops both this year and next .
They were also anxious at the bad publicity bio-fuels were getting. About one third of the maize grown in the US will, if nothing happens to stop it, be used to make ethanol by 2010. Clearly this creates a solid base for farmers in their markets. But US consumers are complaining that biofuels are pushing up the price of food and questioning the entire basis of fuel from crops that could be used for human consumption. Meanwhile massive ethanol plants, like the one we visited yesterday in Iowa, are still being built and the farming lobby is vigorously trying to ensure more and more ethanol continues to be blended with petrol.
Like I say, in many ways its just like home. The same arguments, the same pressures, the same worries. Except that the scale and the production potential here in the US dwarfs anything we could imagine in Britain. But whatever policies are adopted here in what is arguably the most productive farming region in the world will be felt at home in little old Britain soon afterwards.
Comments (2)
David,
Did the team over there get any hint that current crop prices are high because big investment houses are putting their money into agri products instead of the stock market, and so inflating demand beyond what it really is? If this is the case then there's major trouble ahead when the investors try and offload their purchases.
Colette
Posted by Colette Burke | May 27, 2008 4:58 PM
Posted on May 27, 2008 16:58
Collette
I am sure you have put your finger on a very relevant point. There is no doubt that investors have been searching for "safe" sectors to put money and that this has been a factor in pushing up farm commodity prices. Like you I am concerned that when they find something else they may stop investing in agriculture and values may plummet. We could be in for a bumpy ride.
Posted by David Richardson | May 28, 2008 11:36 PM
Posted on May 28, 2008 23:36