Higher corn prices – a bad thing?

I guess I’m just a little bit confused, which according to my lovely wife is nothing new, but for the sake of argument let’s presume this is uncharted water for me.

As a corn farmer the past decade has been a time where low prices have resulted in high levels of embarrassment. As prices have slid lower and lower the level of discomfort has risen to new plateaus. I for one was relieved when USDA moved to direct deposit so the mail carrier wouldn’t see the brown envelops signifying the latest round of government subsidies.

So, you can understand my bewilderment now that corn prices are above the level where LDP’s and counter cyclical payments are no longer necessary. Four-dollar corn has restored corn farmers’ ability to earn a living from the market, instead of depending on the subsidies to pay our bills. My confusion stems from all the negative press surrounding this good news.
After years of journalistic attempts by urban reporters to portray us as welfare recipients and the Environmental Working Groups outing, if you will, of the subsidies recipients, now we seemingly face the wrath of everyone who has benefited from cheap corn. Corn farmers are now looked at as greedy and opportunistic.

Hunger advocates claim that it is morally wrong to use food as fuel. Livestock producers are concerned about rising cost of production. Environmentalist lament the possibility that some ground considered fragile could rotate out of CRP or pasture into corn production. Food industry economists predict rising cost that could make more of our population food insecure. All of these concerns are valid but, let’s face facts here, corn farmers are just glad demand has caught up with supply.

You can’t have it both ways, corn farmers cannot be vilified for taking subsidies one day and then crucified the next for causing all the anxiety listed above.

It’s time to reconsider the relationship between the commodities and the different sectors of agriculture. In days past diversified farmers didn’t worry about high corn prices. The old saying was that cheap corn made cheap hogs and vice versa. Diversification meant that if one enterprise was bleeding red ink another would pick up the slack. Today very few of us practice this kind of agriculture, the experts convinced us long ago to concentrate on one specific area and specialize.

So, where does this leave us? All sectors of agriculture need profitability to survive. Hopefully it will come from the marketplace instead of the government’s treasury. We are going through a reorganization of relationships. The realization is that four-dollar corn is not high, it reflects the cost of production plus the profit that is warranted in today’s economy.

We all know what has driven the price of corn higher. I haven’t mentioned it (the e word) and I’m not going to. It is irrelevant to my point. Regardless of the reason grain prices have risen, it is now our challenge to adapt. In a properly functioning market rising input, cost may trigger a temporary reduction in supply bringing about a correction in the relationship between input cost and final product price. This is how it is supposed to work, remember? If four-dollar corn requires ninety-dollar fat cattle and sixty-dollar hogs, if corn flakes go up fifteen cents a box and meat prices at retail increase five to ten percent that is okay. We must return to a more equitable level of price relationship between agricultural commodities.

In an industry where all too often the largest share of dollars flow in the direction of the most powerful maybe this signals a change. Perhaps, what corn prices have done this winter is a harbinger of something we all desire. What I see for the first time in a long time is the law of supply and demand working; it is our responsibility to see that it flows through to other sectors.
Competition is the force that can drive this change; OCM is the power that will restore competition.KM