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Ray Grabanski: Thanks for high prices

Grain prices have had a healthy run higher in 2010, in spite of relatively decent US yields of most crops.  That has allowed farmers to have another good year in 2010, not quite as good as 2008, but profitable nonetheless. 

Much of that run higher was due to production problems in other parts of the globe, with Former Soviet Union countries and European weather adverse for much of the summer, with too much rain in some areas of Europe, and too little in others (Russia, Ukraine, and Kazakhstan).  This, along with aggressive fund buying, led to much higher prices in the summer of 2010, with prices reaching their peak basically at the November crop report Nov. 9.  Prices have retreated since then, but there is a lot of the marketing year left.

A lot of credit for the run higher has to be given to funds, who have bought up the projected carryout many times over in the rally to date.  That has pushed the prices of grains up to levels that have only been exceeded in the huge 2008 rally.  Corn rallied to $6.05 this fall, soybeans to $13.50+, and wheat to $8+ futures.  These are very profitable levels for US farmers, and give us a lot to be thankful for this Thanksgiving Holiday weekend.  

While current prices give us a lot to be thankful for, we also have high prices going out the next few years for grains, price levels that will prove profitable not just for this year, but also for the next few years.  Corn is around $5 through 2012 crop years, and soybeans are over $11 through the 2012 crop years.  Wheat prices are $7-$7.50 through 2012 as well, and mean that farmers not only can be thankful for good prices for this year, but also through the next few years as well.  

That's quite a change from the price levels we were looking at following our washout of prices from the financial crises of 2008/09, when prices sagged terribly following the housing crises and subsequent fallout from it.  

Land prices sagged following the financial crises, but the past year has been very supportive for land values, with most cropland areas suggesting around 10% land price hikes again for the past year.  These healthy gains are another reason for optimism in the ag world, as it further supports farmers balance sheets and makes the financial gains of 2010 significant indeed.  When you add in the current profitability of producing grains with the gains in the asset values of agriculture, we have a truly golden period of agriculture the past 4 years.  

Given the prices of grains out into 2012, that financial success is expected to continue as of today.  Yes, indeed, we truly have a lot to be thankful for this Thanksgiving weekend in agriculture.  At a time when the rest of the country is still suffering from economic difficulty (we still have unemployment rates of near 10% in the US), agriculture is still in a boom phase.

While all good things must come to an end, this Thanksgiving weekend is a time to count our blessings, and Thank God for the opportunity to be producers in one of the most free places to produce in the world.  We don't have an export ban in place (Russia), no government controls on our lives that inhibit our production (like many places in the world), and have an infrastructure that is the envy of most of the rest of the world.  We can all Thank God for our opportunities that we've been offered here in agriculture, especially over the past few years.  This indeed has been a golden period in agriculture, and we have been fortunate to live through these last few years of relatively profitable production.  Lets hope the prosperity continues over the coming years, as is projected by current price offerings.  

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The information contained, while not guaranteed as to accuracy or 

completeness, has been obtained from sources we believe to be reliable.  

The opinions and recommendations contained are based on our judgement 

and do not guarantee profits will be achieved or that losses will not 

be incurred.  Recommendations should not be construed as an offer to 

buy or sell commodities.  There is substantial risk of loss in trading 

futures and options on futures. 

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Ray Grabanski is President of Progressive Ag, a marketing and risk 

management firm for farmers located in Fargo, ND.  For questions or 

comments, or if you are interested in more information about 

Progressive Ag's common sense marketing services, call 1-800-450-1404 

or email Kristi@progressiveag.com.

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