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Roy Smith: Some things I don't understand!

Agriculture.com Staff 05/08/2009 @ 10:30am

I took my last economics class at the University of Nebraska in 1958. My knowledge of economic issues is a bit hazy from all of the years that have passed since my exposure to the theoretical side of how money works. My expertise comes more from watching grain markets and farm management issues than from text books. Maybe that is the reason that some things that are going on now don't make any sense to me.

As I see the recent economic melt down, it seems that we got in trouble because a lot of people spent money they did not have and could not pay back. This resulted in their not being able to settle their debts. This is similar to what happened to farmers in the 1980's except that the problem is much bigger this time. The government solution to this is to stimulate the economy by giving away money it does not have. What kind of economic logic does that illustrate? This seems to me to be a perfect example of the first law of holes, "When you are in one, stop digging".

A second government action that seems illogical to me is that they are going to give every social security recipient an additional $250. The only reason for this action that I have heard is that they think those who are on social security will spend the money. Supposedly that will result in further stimulation. I will gladly cash my check! However, it seems like a strange way to manage money because I really don't need the cash. I had the best year of my life financially last year. The money will probably go into the grand kid's college fund. I am not opposed to getting a check back from the government after what I sent them on April 15. However, I would prefer that it come from money they have left over after expenses, not borrowed from my grand kid's earnings in 2030.

The most recent revelation is that the president is going to push to have farmers grossing over $500,000 ineligible to get direct payments. I am not opposed to having limits on farm program payments. However, it seems unfair to me that the big banks are getting infusions of cash stimulus money in the billions of dollars, but farmers have upper limits on the size of their farming operations to qualify for payments. The economics of this seems like trying to suck and blow with the same breath. Stimulating on one side and restricting on the other side is like lifting yourself up by picking up your chair while you are setting in it.

I guess I am too ignorant of economic principles to understand the solution to this economic crisis. I can grasp something of its effects by looking at the monthly statement of my meager retirement account. I am more interested in what price I need to get for my 2009 corn crop to pay for the $460 per ton nitrogen fertilizer. So far prospects look acceptable as long as I have an average crop and can sell it for the price offered today. The trick is to sell it for that price while the yield and the cost of production per bushel are moving targets.

At least we grain producers are in a favorable situation because there is a chance of selling for a profit. That is not the case for livestock producers and for many in other segments of the economy. That is something you should think about when deciding whether for forward price this year's crop or to take your chances on the markets this fall.

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