Gene Logsdon and Friends

What’s Your Game Plan As Corn Prices Skyrocket?

In Gene's Weekly Posts on April 13, 2011 at 8:11 am

From GENE LOGSDON

Forgive me for returning to this topic again, but history is being made in the corn market and the mainstream press isn’t paying attention. Corn prices hit an all time high last week. As you pull on your boots and head for the garden or fields for spring planting, what are your plans? Are you ready for some seismic changes in food prices? Do you feel too helpless to do anything much but keep on hoeing? Am I overreacting?

Corn recently made it well into the $7.00 plus per bushel range, to an historic high, and a rise of about a dollar a bushel from the week before, indicating how eradicate the market has become. As I write this, the market is bobbing up and down around $7.50 like a basketball during March Madness. The USDA just came out with a report in which it said, much to the surprise of nearly everyone, that corn stocks remain unchanged. But then the experts came on with a litany of “it depends” about how one should interpret the meaning of “unchanged.”

We’ve heard for months now that corn was in short supply. There are a number of reasons, supposedly. The demand for ethanol was going up, supposedly. The ethanol plants were buying more corn, supposedly. Other countries were importing more corn, supposedly. Weather outlooks are iffy, supposedly.  I can write more sentences ending with the word ‘supposedly’, but what’s the use. Even the grain traders are saying they don’t know what’s happening.

You can read all this stuff in the farm news yourself. I don’t really care to hear any more ‘supposedlies’. I just want to know the what of it, not the how or why. At the livestock auctions in eastern Ohio last week, buyers and sellers were talking glibly of ten dollar corn by this summer, lamb prices over four dollars, and heaven help the cattle market. If you happen to be raising your own calves for meat right now, you could not have a better investment IF you aren’t feeding them seven dollar corn.

Others at the auctions were convinced there is going to be crash. Even farmers who still have last year’s corn to sell (not many), looked at me and said: “this is not good.”

The National Corn Growers Association and food wholesalers and retailers are at each other’s throats over the way ethanol appears to be driving up the price of food. The chairman of Nestle’s has been particularly strident in his criticism, really ripping the corn growers and the ethanol suppliers and especially the government’s generous subsidies to the ethanol plants, insisting that the world needs all its tillable land for human food, not car fuel. I think he’s right, but the corn growers are lashing right back, declaring that the food industry’s attacks are inaccurate, unwarranted, etc. etc.

This much I know from history. During the Irish famine, the landlord farmers of Ireland continued to sell their oats to England where they could get a better price for it than from the starving Irish, until the government stopped them. I am way too pessimistic to think that could not happen again. There are plenty of people who would choose to use corn to feed their cars, boats and airplanes rather than starving people.

What if food shortages really do develop, even temporarily? What are we supposed to do in anticipation? Maybe everyone who knows how should plant their backyards to corn. No, I don’t have seed for sale— I’m not trying to take advantage of the situation. I am just thinking that if corn goes to ten dollars a bushel, I could plant and harvest five acres by hand real cheap, and at 200 bushels per acre, have $10,000 worth of corn.  Farmers, for sure, are planting more corn according to reported government planting intentions, so why not the rest of us.

Well, not all of them. One of my favorite contrary farmers, who farms about 800 acres near me, called to tell me that he was once more going against the flow. He is planting all soybeans this year, no corn it all. I’d accuse him of reading my novel, “Pope Mary” who did the same thing, but I don’t think he’s ever read a book in his life.
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  1. 40% of the corn crop goes for ethanol now. Instead of driving less and more efficient vehicles, we make food into fuel so we can continue to guzzle gas. Future generations will look back and shake their heads at our foolishness. Political unrest will be rampant around the world as food prices increase. Corn stockpiles are very low worldwide and alternative feeds being looked at currently. All we need is one major drought or other natural disaster in our corn belt to make a bad situation catastrophic. Using GMO corn seed is very risky and could have major issues in the future than we cannot predict.

  2. I feed grains to my poultry and dairy goats. I don’t have the right kind of land to grow corn (all hills), but it makes great pastures. So I’ll probably do a lot more grazing and feed a lot more hay and take a bit of a hit in production. I’ve wanted to move towards breeding a dairy goat the produced well enough on grass and browse and $10 corn is a great motivator. My geese already get most of their nutrition from pasture, I just have to use an extra gallon of $4 gas to keep the grass short enough for them. The chickens free range, so maybe I’ll just raise them seasonally and not feed them through winter.

    I’ve been putting in more fruit trees and berry bushes. Don’t need any corn to grow plants.

    deb

    PS We in the US have been spoiled by cheap food and cheap gas. Guess that’s going to change.

    • @Deb, if you use a “quick rotation paddock system,” I’ll bet you can stop mowing to “keep the grass short enough” for your geese.

      I’d send the goats through first, a half-dozen or so in a quarter-acre paddock for 3-5 days or so, then move them onto the next, sending the geese into the one they just vacated. This breaks parasite cycles, as well. It’s a variation on the Salatin Rotation. (He uses cows and chickens.)

      Our goats get some grain to keep them occupied while milking, otherwise, it’s browse and grass only. (They *do* need browse, though. We throw fir boughs into the paddocks for them.)

      Fencing is expensive, but does can be controlled economically by two strands of electric, knee and hip high. (Kids and bucks are another matter.)

  3. Having done a bit of resource modelling, all I can say is that when inelastic supply meets expanding demand, volatility results. Take the hare/bobcat (or any other prey/predator relationship) logistics equation, replace “oil” for the prey, and “humans” for the predator, and you see the same wild gyrations.

    The plain truth is that the human species is in overshoot, aided by fossil sunlight, which is now going into irrevocable decline. Fasten your seat belts, folks! It’s going to be a bumpy ride.

    I have three words of advice: localize, localize, localize. It’s three words for a reason: 1) Grow all the food and energy you can. 2) What you can’t grow, get from your neighbours and nearby farmers. 3) What you can’t grow or get from nearby farms, you’d better decide just how important it is to you in a time when the price of oil can move through a 5:1 ratio in a few short months, as it did when it dropped from $147 into the $30 range.

    Now oil has been sticking over $100, and some economists claim that our civilization can’t continue if oil remains above $85. My bet is that it will spike to near $300, the economy will collapse, and oil will tank to under $60. Lather, rinse, repeat.

    So goes oil, so goes anything dependent on it — like corn. The Singer cartoon is perfect in illustrating that! Here’s another that I stick in every presentation I do:

  4. II’m not a farmer, so I don’t have to make that decision. I recognized food prices had to go up about 18 months ago. Last year, my backyard became a garden. I raised about $2,000 worth of vegetables at retail organic prices. Considering I didn’t have to pay for vegetables from the store with after tax money, it was worth about $4,000 in earnings.

    This year, the tiller and all the tools are paid for and the garden is bigger, so the profit will be even larger.

    This year, I’m going to plant a lot of pumpkins in extra spots around the yard and have a garage sale near Halloween. I hope to earn about $500 from that. We will see how it works. The seeds are free – saved from last year, so there is no risk.

    Since I work at home, it takes zero time to work in the garden. I am just replacing non-productive activites a day with productive actvties.

    My mother used to say “Seeds are the best investment.” I should be able to turn about $100 in seeds to about $2,500 in profits not even counting the tax benefits.

    Asking the government to help us is a lost cause. I’m thinking we are going to have to learn to be more self-supporting and thrifty and learn to isolate ourselves as much as possible from government interference.

  5. I think part of the price problem is oil speculation. There’s a hell of a lot of oil in bringing corn to market, but then, there’s a lot of oil used to bring just about anything to market, for that matter. But we both know that corn is heavy feeder, and to use it for fuel is stupid because it’s a net proposition.

  6. Not just corn but all the markets are crazy now. We buy lightweight calves to raise and calves we were buying for 20 to 40 cents a pound are now at $1.50 per pound. So we are trying to adjust to get enough calves to make a go of it this year.

  7. While I think this is likely to be an unmitigated disaster for many people who are dependent on grocery stores (and that’s a scary way to live, I think) I use so little grain that it won’t make a big difference to me. The cow gets a little as a reward for milking, but it’s not critical to her production. The old broodmare gets a little to help keep her weight up in winter. Other than that, it’s pasture or hay for the ruminants; ditto plus garden surplus, food scraps and extra milk for the omnivores. Since I raise animals mostly to feed our family with a few left over to sell, I’m not tied to a specific market or time frame–if it takes a month or two longer to get to butchering weight, it’s not a catastrophe. I expect food prices to continue to climb, and some things to become scarce as the cost of growing them gets too high, but we should be well buffered between the livestock, big garden, fruit trees and blackberry bushes. The blackberries could probably supply all the fruit we need in a pinch, and since they’re wild, there’s neither cost nor effort beyond picking. Right now there are plenty of wild spring greens, too: miner’s lettuce, amaranth and purslane aplenty to liven up the salads. Not to mention morel mushrooms, and the cattail corn will be coming along soon. None of them depend on corn, fossil oils or even people to survive and provide food. We even have an asparagus bed that I would guess as being between 50 and 80 years old. While I do give it attention in the form of water, mulch and the occasional sprinkle of minerals, it was producing when we moved in here after no care whatsoever for many years, and I’m sure it would do so again. Let’s hear it for low-input food sources!

    • Way to go, Beth! I really enjoyed your latest blog about thrift and frugality — two words that seem to have disappeared from the American language, because the corporations can’t tolerate such concepts.

  8. Rising feed prices, particularly corn, put us out of the pig business before we could ever get it off the ground this last year. We’re now down to one Tamworth hog that we intend to AI this year after I can grow enough corn to feed her. I have several varieties of open pollinated corn we will be planting next month. Otherwise our beef cattle and goats get primarily pasture and good hay. Feeding our broiler chickens will be much more expensive this year but we can make up for some of the expense with our diversified operation. I have finally had to raise the price of our grass fed beef and may get out of the meat business altogether with the price of calves as they are now. I can sell calves instead of feeding them through a couple Winters to fatten them for meat.

  9. ” indicating how eradicate ”

    Pun intended?

  10. Gene,

    You are not the only one wondering about crop prices, believe me. The old argument keeps coming back: Are these new price levels for real, or are they a flash in the pan? Nobody knows for sure, but I am old enough to remember several times when the crop markets have crashed and personally I believe they will again.

    I am convinced that the volatility we see is a result of the fast approaching end of our fiat (paper)money system that is backed by thin air and nothing else. Learning self sufficiency and cooperation with neighbors is worth more than gold and silver.

  11. Hog grain has gone up $125 a ton since past fall. I have implemented pigs eating baleage routine over the winter here in the cold northeast. The pigs have wintered on baleage (and have grown well I might add with very little grain). I do feed them some grain but it is purchased from a local farmer. We can not survuve feeding pigs an all grain diet. It is not sustainable. Baleage is still cheaper than grain. I have also started finishing pigs on barley. Still way cheaper per ton than hog grower.

  12. we’re planting barley to feed the livestock with…
    and oats….

  13. I spent the last several days working on a pasture that last year’s hogs were in. They did a great job of plowing for me, leaving only the need to harrow and throw down seed. We accomplished the seeding of some wheat and some oats today. I suppose I should throw in some corn soon just to see what happens! I hope that our next crop of piglets can get most of their food from our ground instead of from the feed mill. I wanted to go towards pasture fed hogs before the price of corn went up so I can’t say the price increase motivated me, but I sure feel better about planting food plot / pastures than before!
    We are also expanding our gardens every year! Before long, the sheep won’t have any yard to mow!

  14. I think the main problem is the current economic model that is being used – that of infinite financial growth is the only mantra listened to. This is plain stupidity since we are all on a very finite planet. I try to follow a sustainable alternative called “simple living” (Google that phrase and see what you get) however this is a personal choice and I have my doubts that too many others, especially urbanites, would see the many positives in this way of life.

    For me it is bliss – I know what I need, I know how to get/make/produce it and I probably can do without it if it turns to custard …. and you get to take the time to see the world at work around you.

    Why wait until you pass on before you see heaven?

    • @John Finlayson wrote: “I try to follow a sustainable alternative called “simple living”… I have my doubts that too many others, especially urbanites, would see the many positives in this way of life.”

      I see things a bit differently.

      In the future, there will be three types of people: 1) the nobility, 2) the serfs, and 3) the freemen. (or “freepersons,” if you insist :-)

      Most of us don’t have a chance of being in Group #1.

      99% of everyone else will be in #2 or #3. The difference between #2 and #3 will be in one’s willingness to embrace “simple living” and make it work for you.

      In other words, in the future, almost everyone will be “living simply.” Some by choice, but most because nature will force it upon them.

      The biggest thing that will keep today’s urbanites from taking up simple living will be their desire to end up in Group #1, and their belief in the American Dream that all it takes is hard work. As their wages and benefits continue to slide, they’ll end up doing anything for anyone, just for food and shelter.

      I’m finding that many urbanites are beginning to see the light. But most others are sleep-walking their way through this slow-motion disaster. As George Carlin noted, “It’s called the ‘American Dream’ because you have to be asleep to believe it.”

  15. I used to “flush” my Shetland ewes in the fall to increase their lamb yield. Then I fed whole corn/whole oats/molasses to them for about a month during lambing.

    This year I was too busy in the fall to flush the girls. When I went to the feed store to buy grain I was stunned at the price increase over the previous spring.

    I am graining the ewes now as lambing approaches. But I’m being conservative about what I give them and I’ll taper it off as soon as I dare. Thankfully, all of them were in excellent flesh when sheared last week, and that was on grass hay from some fields a mile away.

    I’ll skip flushing in the future and more actively cull for a flock that thrives on the grass/grass hay only. I’ll try to find an alternative feed supply for lambing.

    We’ll also add a few more apple trees and try to grow more gardens this summer. I just bought a book on local edible forest plants, as I’ve been interested in harvesting that way for a long time. (baby basswood leaves taste just like green beans…only better!)

    I recently left a job I was very unhappy with to try to pursue a better food and home life for my family. My husband was very encouraging. He is putting in more time at his better paying job, and I am doing more cooking, organizing, and food production. Since our children have to eat gluten-free, and that food is very expensive to buy, we are hoping to produce more at home and save money. Maybe this route isn’t for everyone, but I’m excited to give it a try.

  16. We planted a couple acres of rape some years ago to supplement our sows. Worked well except that the york (white) sows were easily sunburned because of the rape. We actually put sunblock on a few of the sows to protect them!

  17. What great responses! Darren Allen, I had not ever heard of feeding baleage to hogs. Very interesting. Curt Gesch, that was unintentional. I’m not that clever. I see that several of you are going to feed barley. Years ago, maybe still, farmers in places like Montana where corn doesn’t grow very well, fed barley to hogs and had good luck with it. Said the pork tasted different but just as good. Yes, John Finlayson, I think the problem is what you say it is, believing that financial growth is infinite, which requires one to believe that real goods growth in infinite and it ain’t. But isn’t that the underlying principle of capitalism, infinite growth? Gene

  18. Three comments: Jan, thanks for the compliment! Sabrina, if you’re content with single lambs and an occasional twin, your ewes will do fine on just good quality hay or pasture. We don’t grain ours–except for the occasional corn tortilla treat we use when we want to pen them up. Gene, don’t you think the basic problem with that model of infinite growth is that it requires infinite resources?

  19. Gene,
    I got the idea from Walter Jeffries at Sugar Mountain Farm in Vermont. He shares a similiar climate and does pastured pigs. I started thid Jan feeding the Large Blacks, Tamworths and Red Wattles the baleage. $40 a round bale VS $580 a ton. 1 round bale goes 1 adult pig one winter. A ton of grain lasts not long. I do buy grain made locally and they sell it for $280 a ton. We need to be more local and support each other as much as possible (the farmers).

  20. You’re on the right path, Gene. Most of your revenue will be profit because you’ve not got all the machinery/seed/chemical overhead. I’ll go you one better though. I tend to not argue with enough farmers that some of them will let me glean the end rows for ears (no one cultivates anymore, so there’s actually a fair amount of ears from surplus stalks). I’ve found your average agribusinessman will not concern himself with getting out of his air conditioned cab, and they are getting such a great price, they will not feel bad letting someone pick up the scraps. In my part of the country, taking a long ride on a bicycle in October usually lets you find piles of shelled corn that the hired hands have spilled from the grain trailers and augers. If you have good people skills, they’ll let you clean it up and keep the corn. They don’t want to run grass and gravel through their driers. In a weird way, that trickle down Reaganomics sort of works.

    That was a good observation someone made about Irish landowners raising oats for the English. During the Civil War, some plantation owners had their slaves growing cotton for profit when the rebel soldiers were starving for the corn that could have been raised. In a weird way, that trickle down Reagonomics sort of doesn’t work. The commodity price bubble will burst, prices will collapse, and some of these agribusinessmen will go bankrupt, the most leveraged going first. Like someone said earlier; wash, rinse, repeat. Older people have seen it before.

    I have a friend who teaches vocational agriculture (is that an oxymoron?), and needling him is great sport. I tell him the ethanol subsidy is just the latest welfare program for people born extremely wealthy. It’s a net energy loss, and it is fueling the death of the Gulf of Mexico, which is being poisoned by soil, fertilizer, pesticide and herbicide runoff , not to mention oil spills. We could buy ethanol from Brazil for half the price we pay for corn ethanol, but it’s illegal, for much the same reason moonshine is illegal. Some of the recent unrest in the world is being fueled by higher food costs. I have a theory that good old human nature will keep things in line: the price of corn is getting close to the point where the risk/benefit graph on theft is starting to look interesting. I’ve husked a little corn in my time (we used to open up fields by hand), and I know you’ve been to husking contests in Whynot county, Gene, so you can appreciate how fast you can take corn off by hand if there’s a profit motive or threat of prison. Wouldn’t even have to husk it, just shuck it and husk it later. These groundhogs can’t monitor their entire empires without hiring Pinkerton people. Corn can’t be traced: no serial numbers, so if they aren’t caught at the scene, they’re home free. People will probably laugh at this idea, but thirty years ago those people were wondering why their nitrogen was disappearing from the tank. Drugs were a problem in town, not in the country.

    Sorry about the rant. This ethanol crap really makes food unavailable for some people.

  21. Roof, I figured out that someone like the champion state husker of 1937 (Noble Goodman, you might even remember him) could easily make $250 an hour stealing corn out of a field along the road, tossing the ears in his pickup. Another way to get free corn is to sweep it off the side of the road wherever trucks have to turn sharply on their way with an overload, hauling corn to the elevator. Believe it or not, a farmer friend called me from the elevator yesterday and said someone had spilled about a bushel of corn on villlage property (Harpster) and if I hurried, I could gather it up, take it over to the elevator, sell it, and take Carol out to lunch. Gene

  22. Although it is not my main source of spiritual nourishment, I am always invigorated by a visit to Pope Gene’s and his church of almighty good readers/writers. Such an interesting range of thoughts and insights and humor all evoked by the price of corn. I can tell from your response Roof that you have been paying especially close attention to the homilies at St Contrary’s Basilica. Very well done.

  23. Ugh. First the housing bubble drove land prices out of my range, and now corn prices are pushing them even further. A farm does not seem to be in the cards.

  24. Be of good cheer, Someday. I think I understand what you feel. I grew up in a farming family, and it was a great way to live. I wasted a lot of time trying to figure out a way to make a living at it, and it was liberating to give up that dream. In Kipling’s poem, If, he said something about not letting your dreams become your master, and damn, it’s true.. I ended up farming, just not the way I had anticipated, and damn straight not the way I had planned. The price of land will come down, so keep hold of your cash, and keep your eyes and ears open and chin up. A neighbor of mine died maybe eight years ago. He was around 66, owned hundreds of acres: a millionaire. His body was worn out, and he and his wife never took vacations; they didn’t own the land, the land owned them; not much joy in their lives. I pray to Buddha that doesn’t happen to me.

  25. The true culprit is the Federal Reserve and its reckless Quantitative Easing Program(s) (QE, and QE2). They have ballooned their balance sheet from $800 billion to $2,600 billion in two years. This is high powered money that is going to make prices explode in the years ahead. The worst part about this is – they are not yet done with the QE.

    Over the next three years, I expect corn to reach (spike to) $20/bu, beans to reach $30/bu and wheat $25/bu. Seed and energy costs and everything else will also rise. However, food prices and other essential items will lead the pack.

    Use your farming profits to buy more manure or fertilizer for the next years. Don’t buy excessive land or machinery in the hopes that gigantic ‘real’ returns will last forever.

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