In A Word, Uncertainty

By this time of the year (at this writing, it’s early November), we usually have a pretty clear picture of where agriculture is headed in the year to come. There are always surprises, of course, but we are rarely caught flat footed as we look over the horizon.

The feeling is clearly different as we scan the landscape ahead in 2009. The economic crisis that we first thought might create problems only in the US quickly sent ripples of monetary devastation throughout the world. And the initial days following the election of a new president have not provided any more clarity on the global economy. In a word, uncertainty.

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We do a lot of work to prepare for the year ahead, including our own internal planning meetings, reader surveys, industry research that a number of you have participated in, and roundtable discussions with industry experts. Each will yield a number of key issues that we then use as the foundation of our plan for the coming year.

One such meeting we hosted was held in mid-October in Chicago, Illinois — the timing just late enough to give the 20 invited industry experts a flavor for how challenging the economic situation was going to get.

A key goal of the meeting is to pose key questions related to the year ahead, and to try to come to some resolution as to what direction we should take. Posing questions in this economic climate only served to create more questions.

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What appears to be the biggest question right now in the US is: Can growers get the credit they need to produce the crops they want to produce? This was proving to be a difficult question even before the economic crisis — crop prices have been dropping precipitously from their record high levels late spring and early summer this year, while the cost of fertilizer, crop protection, and seed have gone up with no clear signs of relief. As growers do the numbers, they are finding that the cost of inputs placed against current crop prices won’t even deliver a break-even balance sheet.

Manufacturers are concerned that orders for product on the books could be dropped by growers who are not able to get credit. Purchases made based on the anticipation of “high clover” economic times for the foreseeable future could be postponed or cut.

At this point these are worst case scenarios — some experts say that because the rural banking community did not get caught up in the risky real estate ventures that have brought down so many of the larger financial institutions, growers will be in better shape to get credit than their urban counterparts. But that remains to be seen.

On a different front, biofuels in the US — or, at least the concept of corn-based ethanol — suffered against the wildly fluctuating price of corn in 2008 and, more recently, the global drop in oil prices. Verasun, one of the country’s largest ethanol manufacturers, was forced to file for Chapter 11 bankruptcy protection as a result of having to buy corn to feed ethanol facilities at those high mid-year prices.

Corn-based ethanol, widely criticized around the world as a food for fuel trade, will not completely disappear. But there is a clear recognition that future development in biofuels will not involve food crops. Which direction will it move? Again, in a word, uncertainty.

What will commodity crop growers plant next year? In the US, farmers are coming off a year of record income. So while they are more pessimistic about prospects for a prosperous year ahead, the overall mood is not as bad as one would expect. Practically, it would appear that growers are looking to plant more soybeans vs. corn due to the lower overall input requirements. The US Cotton Belt appears particularly poised to push cotton aside in favor of beans. But there will still be plenty of corn sprouting out of the US Midwest.

Despite the uncertain road ahead, at the end of the day we are the industry that makes feeding and clothing the world on a large scale possible. We at Farm Chemicals International are committed to providing you the information and resources to help you negotiate the difficult waters ahead. We wish you a prosperous 2009, and look forward to serving you. 

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