Bumpy Crop: Farming’s Sudden Feasts and Famines

Benjamin Riensche has just come off two of his best years in farming. But like growers all over the globe, he is in the midst of a more turbulent era of sharply rising and then suddenly falling prices.

“I never thought the stakes could get so big,” Mr. Riensche says. “We’ve gone from the nickel slots to world-class poker.”

All this is happening even though the world has been producing more grain than ever. Demand has grown faster than farmers could increase their production most years of this decade, helping to drain grain reserves. Unusually good weather in most of the world this year is refilling grains stocks once again. But the situation could easily change. Some economists worry that the world will consume more grain than it produces by 2010, particularly if oil prices recover enough to make the production of ethanol from corn more profitable again.

…Commodity prices are changing more quickly than farmers can plan which crops to grow. The price of a bushel of corn rarely varied by more than a dollar in a year’s time for most of the 1980s and the 1990s. But this year, many U.S. corn farmers have seen the price of their crop swing by $4 a bushel.

The rapid change in the fortunes for Mr. Riensche is not uncommon for farmers around the world, who are experiencing an unprecedented era of volatility. After prices of crops peaked in the summer, bumper crops recently helped reduce prices, dousing the anger behind riots in nearly 60 countries. But crop reserves remain unusually low while demand continues to grow. That means the slightest disruption — flooding, drought, disease, or extra-cautious farmers — could have a much bigger impact on prices than it would have had in recent decades.

“There’s no cushion,” said Daniel W. Basse, president of AgResource Co., a Chicago commodity forecasting concern. “It’s a very volatile situation.”

Truth About Trade