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New Year's musings!

Agriculture.com Staff 12/29/2006 @ 12:38pm

It is tough to think of something interesting to write about during the holidays. Even with prices higher than they have been in many years in December, market action has stalled during the holidays.

It is fascinating to hear and read people's comments concerning markets right now. I think that everyone is wondering if the current situation is a move to a higher plain or if the bubble will burst and we will end up being worse off in the end.

I experienced the move to a higher level in the early 1970s. It began in 1972, my fourth year of farming full time. Most farmers missed the first round of high prices because they sold at what had previously been historically high prices. They then experienced the negative thrill of seeing prices double and they had nothing to sell. That experience caused some people to become students of marketing. Prior to that, the government program was the only game in town.

I get annoyed when I hear farmers tell about how good things were in the middle and late 1970s. One of the reasons prices were as good as they are as long as they were is that farmers in the western corn belt experienced a prolonged drought. For me, the years 1974 through 1977 were four years of almost continuous torture. Heavily in debt, owning no land and having young children at home were not conditions that I would repeat under any circumstances. Adding to the irritation were comments from farmers further east that they had never had it so good with grain prices good and expenses not having increased much.

Little did most people realize at the time that our bad fortune would save us from the pain experienced in many farming areas cause by paying too much for land and having interest rates go through the roof. Land prices in my community did not get to the extremes they did in other locations, so fewer farmers ended up with the heavy debt load that ruined so many.

Grain prices never did go back down to the levels they were at during my first years of farming. Inflation seems to have taken everything to a higher level, including the cost of living. Technology has made farming a lot easier than it was back then, but I am not sure we are a lot better off now that everything has ratcheted to a higher level.

It seems like I missed a lot of the opportunities made possible by the higher prices in the 1970s because I did not own any land and was farming pretty small. If current ratcheting to a higher level turns out to be long term, I am going to miss a lot of it because I retired before the full impact will be felt. At least I own some land with no debt and made the decision long ago to continue farming a few acres. I can do that without borrowing and keep my fixed costs at almost nothing. That will give me the benefit of the higher prices without the risks associated with farming full time.

The year 2007 is going to be exciting. Right now it looks like the excitement is almost certain to be good. Somewhere in the future there will be some painful adjustments. I don’t have the foresight to know when they will come or what form they will take. I believe in the principle that the market never makes everyone rich. If I were to give out advice for the coming year, it would be to enjoy the ride, but keep your powder dry. Benefit from the good times, but be ready for the adjustment is sure to come.

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