The New Year

January 14, 2009

Hello everybody out there in farm country. This radio commentary is brought to you by the Renewable Fuels Association, Wal-Mart Stores, Monsanto, and John Deere. They are all friends, supporters, and allies of a healthy farm economy and prosperous rural America. Thank you.

And now for today's commentary--

If we look back over our shoulder to last year, we can hardly believe it. Oil prices went out of sight to near $150 per barrel and then plunged to just over $30. Grain prices shot up and then came down. The food processing industry tried to blame ethanol for an increase in food prices. Livestock producers suffered with high priced grain. There is a long list of individuals and corporations that bought energy and grain at the high and are now in financial trouble with the price collapse. The nation's economy is barely limping along. Unemployment is above 7%. Is there hope for 2009?

Right or wrong, I am reasonably optimistic. I think we have seen grain prices move to a new plateau. Thirty-five years ago, Secretary Earl Butz sold grain to the Soviet Union and grain rallied -- almost doubling in price from a little over $1 per bushel for corn to a little over $2 per bushel. It stayed in that range for 35 years. Now, with growing global demand for food and crops into fuel, we have jumped up another notch. Input costs will be up also, but the market will sort this out. I think it is important to note that short-term interest rates are low. Financing this year's crop will be less expensive.

Livestock producers don't like paying more for feed but this is another adjustment that I think will be achieved. If livestock producers respond to low prices and cut production, then by year's end, their bottom line will be looking better. I'm hopeful. I can tolerate the hog barn smell when prices are high, but when you lose money on every pig to market, they really smell bad.

Will the new Congress or President do anything to help us or hurt us? I think the stimulus package will support renewable fuels and provide infrastructure money for roads, maybe locks and dams. Taxes will be cut some, but a warning to look out in 2010. The estate tax will not be eliminated but will probably continue the $7 million exemption in force now.

Last year was a wild year, and this year could be also. Can't remember more uncertainty.

Until next week, I am John Block from Washington.