Our commodities superstar, Kevin Kerr, recently went to meet with corn and soybean farmers (as well as feedlot operators) and he told MarketWatch, "the conversation was positive but also fearful."
"The overwhelming sense of farmers here is that the average urbanite is unfazed by what farmers are going through. After all, costs for the average farmer are up more than 100%. Profit margins have narrowed or become non-existent and fuel costs, especially diesel, have been a killer.
"Farmers feel that the average consumer blames them and think the farmer is getting rich of these food costs; when in reality there are no yachts in Waseca, Minn., only farmers trying to grow their crops and take care of their families.
"The increase in input costs has been as big a burden on farmers as it has on the rest of us. The average person living in the city is relatively unconcerned as long as the water is running, they have a job, the ATM works and there is food on the shelf. Most urbanites are likely more concerned with who got the boot on ‘American Idol' then the possible approaching food disaster.
"One thing is for sure, agriculture markets are not like other commodities, and demand and pent-up demand are real. This year, the corn crop needs to be a bumper crop or there will be a shortfall. It's likely that we will have a low yield crop, and $7.50 corn is a real possibility.
"Corn-based ethanol remains the law of the land, and like it or not, nothing is going to change in an election year. All bets are off until we know who will be president."
*** Brazil is booming. Its bonds were upgraded yesterday. Now, they're considered investment quality. The Brazilian currency is rising against the dollar. Exports tripled in the last five years. The country is now a net creditor with the rest of the world – with $171 billion in reserves. And its stock market is the best-performing major market in the world this year.
Ah yes...the world turns. Now, the banana republics get rich, while the rich go bananas.
Bill Bonner
The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Related Articles:
- Farmers Say ‘Rain, Rain Go Away’ Throughout the United States
- Aquaculture: Soybeans and Corn Under Water
- Corn Prices on the Rebound
- Cattle Prices Have Risen Only 1% This Year
- The Food Crisis of 2010
About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by Freak'd on 2 May 2008:
Some years ago, I attended a weekend long booze-up at a mates parents farm in NSW Australia. Anyway my friends dad grew corn for a major American breakfast cereal maker, and we got talking about corn and such. He was contracted to sell the corn to that buyer for some figure that I can't remember anymore, but what I do remember is that at the time, in a $4 to $5 - 0.5kg box of corn flakes, there was less than 50 cents worth of corn in it! Given the cardboard that the box is made of is also pretty cheap, that must be some damn expensive ink on the box!!
The corporate food chain from farm to you have us all by the balls and is a total rip-off. We pay what we will bear - which has minimal relation to cost. Water and electricity will be next......
Comment by karl on 5 May 2008:
Freak'd - the processes the cereal companies use to turn a kernel of corn into a cornflake is extensive and uses a fair amount of energy and labour. I think the energy and labour cost of producing a box of cornflakes would be added to the price of each box of cornflakes, plus a premium of course.
The farmer gets his 50c for the kernels, the box manufacturer their 50c for the box, printers get their fees, etc.. all down the chain. Unfortunately in many cases the farmer looks at the price for his corn, then looks at the price for the box of cornflakes and feels they are getting a raw deal without understanding the processes involved, and the cost of those processes.
Not many people would open up a 50c box of unprocessed corn kernels, pour some into a bowl, add milk and enjoy crunchy goodness.. although it may come to that in the near future..
You are right about water and elecricity though. Electricity companies started price gouging in the late 90's (My Parent's power bill: $30 electricity usage for a month, $80 for a mysterious "Access Fee" - they have solar hot water, gas stove, and 3 lights). And once desalination takes off, the sky's the limit for water prices.
Comment by Coffee Addict on 5 May 2008:
A cheap way to make your muesli or porridge may be to buy a few sacks of grain off the farmer and put them through an old fashion grain grister (a type of grinder). You can buy one at your neighbourhood antique shop.
Seriously, as the cost of processed products skyrockets with inflation and the price of oil, practical home based alternatives will return in many different areas. Farmers markets are thriving in many regional areas and the prices farmers they are getting are in any case very good. Back to the future.