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 The news you keep hearing about sky high grain prices sparking sky high food prices is rapidly becoming outdated.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 ofThe 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
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