Home / Talk / Views / Farm Life / Free markets

Free markets

Agriculture.com Staff 04/01/2009 @ 10:26am

It is another USDA report week. I have never understood why USDA reports are needed. I believe it is too much like being dealt a hand of cards and then, just as the game is beginning, laying them all on the table for all the other players to see.

I am sure there is an economist who can tell me why these reports serve a useful purpose, but all I see is a day or two where the report creates a reason for the market to go up or down (usually down) and then everything goes back to where it was before the report. To me, those USDA reports have the significance of a speed bump on a highway.

But then I have the found that the grain market is more mystifying than usual. The grain market of today is taking its direction from the value of the dollar and the price of crude oil. I can understand part of that.

The value of the dollar affects what other people have to pay for grain when their currency is converted into dollars and given the extreme financial situation worldwide, currencies are fluctuating more than usual. A strong dollar makes my grain more expensive to those buying it.

The price of crude oil affects the price of ethanol which affects the usage of corn so cheaper crude oil makes cheaper corn. After many years of corn being thought of as only food for livestock, it is now part of the energy equation.

The part I do not understand is that whether I grow 150 bushels an acre or 175 bushels an acre or 200 bushels an acre of corn on one-fourth or one-half or three-fourths of my farm does not seem to make much difference. The market is more concerned with the dollar index and the price of crude. The law of supply and demand seems to be ignoring those of us working on supply and focusing exclusively on demand.

As a person who believes that laws should be kept to a minimum, there are a few laws I believe in. The first one is the law of gravity. Gravity is predictable and never changes its position but treats everyone equally, regardless of race, creed, or gender. Being fair or unfair has never been a concern of gravity. It is the perfect law.

Another law I believe in is the law of supply and demand. Supply and demand will always prevail regardless of any other law. The ultimate form of supply and demand is the black market which will become stronger as other laws are created or strengthened to try to eliminate it.

I see the markets much like a sporting event where two teams take the field while referees or umpires watch to keep everyone playing fairly. The job of the referees is to make everyone behave themselves by following the rules of the game and not cheating. It is the government's job to function like the referees or umpires. Keep everyone honest because cheating is not allowed.

It is not the job of the referees or umpires to tell the players what strategy to use or to pick the winner of the game. The interventionist government we have today is picking winners and losers. It is now calling the plays for the teams and over the weekend did the equivalent of firing the coach during the game when it called for the head of General Motors to quit and he did.

CancelPost Comment
MORE FROM AGRICULTURE.COM STAFF more +

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Rain Drains Grain Markets