Saturday, November 22, 2008

Commodity Volatilty Impacts Farming

The old adage is that "Farmers Hold Out for More, but Settle For Less" when marketing their crop. Today the New York Times has a piece on the remarkable market volatility impacting wheat farmers. Here is a quote:
The Kinders still have about 40 percent of their wheat, stored on the farm and in commercial grain facilities. “Farmers are terrible marketers,” said Jimmy Wayne Kinder, 50. “We fall in love with our crop.”

It was the same misguided optimism that caused homeowners to think their houses would always keep increasing at a 20 percent annual clip. Farmers across the country fell prey to it.

David Kanable at the Oregon Farm Center, a mill near Madison, Wis., was paying $7.25 a bushel for corn in June. “We never had a farmer lock in at that price. They wanted $8,” Mr. Kanable said. On Thursday, the mill was paying $3.17 a bushel.

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