Five trends in agriculture
Crop prices and land values are skyrocketing upward. The economy is recovering, albeit slowly. U.S. grain exports continue to hum along. Meanwhile, this is coupled with tight grain stocks.
So what’s wrong with this picture?
“The biggest risk (to agriculture) will be interest rates,” says Jason Henderson, vice president of the Federal Reserve Bank of Kansas City. Henderson briefed members of the agricultural media at the 2011 Bayer CropScience Ag Issues Forum at the Commodity Classic in Tampa, Florida, held earlier this year.
Current federal fund interest rates hover around .25%.
“We don’t know when and how fast, but there is only one direction they (interest rates) will go, and that’s up,” he says.
When interest rates rise, farmland values tend to fall.
“The challenge for agriculture is positioning itself for a higher interest rate environment,” says Henderson.
Other topics and trends speakers at the Commodity Classic discussed included:
· Commodity funds. They play a part in today’s agricultural markets. Still, money put in petroleum and metal funds dwarfs money invested into agricultural commodity funds, says Gary Blumenthal, president of World Perspectives, Inc.
“Usually, these funds dominate commodity funds,” says Blumenthal.