Garden Farming: The Best Investment

From Gene Logsdon

Something is going on that you should be aware of, even though it means that I have to postpone writing about more pleasant topics. Something very fishy is happening in the food commodity markets. The news you keep hearing about sky high grain prices sparking sky high food prices is rapidly becoming outdated. Corn, the leader of the pack in the commodity markets, has tumbled three dollars a bushel in price in the last month. That’s a huge drop in the grain world. Up until about a year ago, corn was lucky to ever get above three dollars a bushel altogether. To have shot up to nearly $8.00 this summer and then suddenly fallen to below $5.00 is very disturbing and veteran grain traders are saying just that in their reports. And other grains are following corn around the roller coaster. Whether these prices go back up as some say, or continue to fall as others say, no one knows. But either way, those of us who have sought security by producing our own food to eat and to sell locally instead of trying to find salvation in the pretend money that the government is pouring into the banks to save them, should count our blessings. That popping noise I think I hear issuing from the Chicago Board of Trade is the sound of grain bubbles bursting all over the trading floor.

All kinds of explanations are being run up the financial flagpole to explain this weird situation, especially since at the start of the precipitous price rise, the United States had more corn in storage than it did a year ago (and the USDA bean counters don’t even know how much garden farmers grow on their small but countless plots of grain). In normal times that statistic would have put a damper on prices. Only a few economists— those who pay attention to the history of greed— have answers to the “mystery” that make sense to me. See what you think.

These few argue that just as in other economic downturns, the moneyed minority has a lot of devalued paper they are trying to find a profitable place to invest. Previously they were putting it in the stock market, and in hedge funds and housing funds of various kinds, but when these bubbles starting bursting, they sought shelter in the farm commodities market. That sent the price of grain soaring and with it, the price of everything connected to food, including farm land, fertilizer, herbicides etc. Now everyone is looking around and realizing that the pretend money has generated pretend grain prices that aren’t doing anybody any good. To cover their backsides, grain traders even started limiting their activity in the futures markets. But the investment firms thought they were in safe territory because the government was pouring money into alternative fuels and that would keep the price of pretend corn and soybeans at profitable levels. That being a wrong guess as events are turning out, pop goes the weaselly commodity bubble.

The gutsy economics writers who argue this way— I pay attention especially to Alan Guebert’s national column, “Food and Farm File” and Eric Janszen on his website and in his essay in Harper’s magazine recently “The Next Bubble”— are now predicting that the alternative fuels market itself will become, by dawn’s early light, another big bubble bomb bursting in air. Why? Although producing alternative fuels is a wonderfully good idea and practical on a limited scale, it just won’t work as a way to allow us to go on burning fuel and electricity like we have been doing. That also means that this “safe harbor” is not big enough to give a decent return on the huge investments of pretend money that big investors are pouring into it.

Suppose the economists who argue this way are wrong. If world demand for food does send grain prices soaring into the stratosphere of make-believe money again, (this seems to be taken for granted right now, but is highly debated in agricultural circles) even without the help of subsidized alternative fuels, then for sure garden farmers will be in the right place. Not only will their food have a paper value beyond their wildest dreams, but they will actually possess it, in their backyards or on their back forties, to eat and to sell.

You can’t eat pretend money or pretend grain no matter how much of it you think you own on paper.
~
See also Gene’s Thoughts On Economic “Inevitability”
~~
Gene and Carol Logsdon have a small-scale experimental farm in Wyandot County, Ohio.
Gene is author of
The Mother of All Arts: Agrarianism and the Creative Impulse (Culture of the Land),
The Last of the Husbandmen: A Novel of Farming Life, and All Flesh Is Grass: Pleasures & Promises Of Pasture Farming

Images Credit: Pig © Martina Berg | Dreamstime.com
Farms © Miao | Dreamstime.com
OrganicToBe.org
| OrganicToGo.com

Gene’s Posts
[Permanent Link][Top]

3 Comments

To Jan Steinman and Karen: I like your reasoning, both of you. I remember writing about home methane digesters in China back in the 80s. Jan, your take on the market sounds logical to me. Being a contrary farmer, however, I always propose the opposite of what sounds logical. The market prophets are NOW saying that we are looking at the second largest corn crop in history. I don’t believe it, but suppose that is correct. Suppose also that China and India succeed in their expressed aim: to become food independent. So we would end up with another huge surplus of grain. Use it for ethanol? If you used every bit of our corn for ethanol, that would supply only 17% of the fuel we use. And what if people really do get smart (not likely) and adopt cars that go a hundred miles to the gallon and also decide going a hundred miles is worse that staying home. And suppose,(very unlikely) they could ever got smart enough to really start curbing birth rates. All would mean lower grain prices wouldn’t it? Anyway it is fun to play prophet but since my prophesizing is predicated on humans acting sane, I will surely be wrong. Gene Logsdon

Gene,
I quit the (lucrative) commodities futures game a long time ago when I realized that I was actually hoping for bad things to happen to farmers so the futures would skyrocket. Having recently unearthed a box of Mother Earth News from the ’70s and ’80s, however, I think that things will even out. It’s amazing how relevant some of their editorials sound right now (doom and gloom, upward spiral, etc.), and much alternative energy we are “discovering” has already been thought of – I’m reading an article this am on the 7 million home methane digesters found in China of the early ’80s!
Regardless, I agree it’s best to have your own food sources even if the price of grain DOES fall, you can’t beat the satisfaction, and most folks can’t get no….

I think it’s very simple, Gene: food is now a fuel, at least in the trader’s eyes.

This means grain will continue to track fuel prices. Oil has fallen from nearly $150 to under $120 a barrel — so why the surprise that corn, the primary feedstock for industrial-scale ethanol production, has done something similar?

Far from a bubble that has popped, this is but a temporary dip. Do you really think North Americans are going to go very far down the “demand destruction” path? Or even if they do, that it will happen very fast?

The IRS is still handing out SUVs — a small business can “expense” up to $75,000 of new vehicle purchase, as long as that vehicle weighs more than 8,000 pounds. This means the cost of a new SUV comes right off your taxes. So how long is it going to take for this bit of “demand” to “destruct?”

There are millions of low-mileage gas guzzlers out there. People can’t afford to abandon them and buy a Prius. So we aren’t going to destruct demand there, either.

The current dip in fuel (and corn) prices is a temporary anomaly in the coming endless spiral upward. As demand hits the supply ceiling, expect turbulent volatility in prices — ups and downs by 50% or more over very short periods.

Be prepared for the peaks, each higher than the next, and take advantage of the troughs — also each higher than the next. And keep growing food, no matter what the commodities market does.

Please leave your comments...

Name and email address are required. Your email address will not be published.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

You may use these HTML tags and attributes:

<a href="" title="" rel=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <pre> <q cite=""> <s> <strike> <strong>