Too Much Of A Good Thing

As of this morning the ag futures markets are listing corn at 3.67 a bushel, soybeans at 9.46, and wheat at 4.33. But as if often the case, out in the real world, at the farm level, the situation is far different. If you’re a farmer trying to sell, you don’t get the futures prices, you get farm gate prices, what a buyer will actually pay to a farmer. And that is often much, much less than what that commodity is trading for on the floor of the Chicago exchange and other commodities markets.

Out in the real world, farmers are looking at farm gate prices for corn of as little as 2.90 and wheat around 3.15. Those prices are well under the cost of production for most farmers. US farmers are looking at a fourth straight year of increasing costs, declining income, and increasing debt.

The problem is we’re growing too much food.

Sounds ridiculous, doesn’t it? Especially when we’re hearing about mass starvation in some parts of Africa and other parts of the world. But the problem isn’t a lack of production. We’re producing more than enough to keep everyone fed. The starvation is due not to a lack of food, but to government corruption, incompetence and war, not to any kind of shortage of food.

Overproduction has become a very serious problem. Most of the grain producing nations are looking at massive surpluses of product. Storage facilities are packed tight. In Kansas they’re actually renting runways at decommissioned military airbases and parking lots to pile the stuff up because there’s no place to go with it.

Meanwhile countries like China and Russia are trying to dump old stock in storage in order to make room for new production, resulting in prices being driven down even farther.

And there seems to be no end in sight. USDA is estimating that corn, wheat and soybean production in the US alone could be the biggest ever since they started keeping records.

 

2 thoughts on “Too Much Of A Good Thing

  1. It’s a shame, because we could be growing so many other great things instead and it’d be better for the environment too. Everyone could be happier for it. This is why markets like animal feed and car fuel are filled with corn… Where the heck else is it going to go? I hope we stop subsidizing large agriculture crops so heavily soon and go back to subsidizing crops that are better for our financial and food security.

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    • I certainly agree with that. But there are so many people with huge investments in maintaining the existing system that any kind of fundamental change in the system is going to meet very stiff resistance.

      This dependence on a tiny handful of crops like this makes me more than a little nervous because I keep thinking back to the potato blight that helped cause the great Irish famine back around 1845 or 1850. The dependence on a single crop, the lack of genetic diversity, led to the loss of as much as a full half of the potato crop or even more by some estimates. If a blight, insect infestation or significant weather event struck one of the main growing areas it could cause wide spread economic hardship that would ripple through the entire economy.

      Liked by 2 people

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