Remembering the lessons from the 2008 financial crisis

Editor’s note: This is the first of a series of columns looking at the lessons learned from the financial crisis of 2008.

Do you remember where you were 10 years ago when we fell into a worldwide financial crisis?

(It still doesn’t have a generally accepted name, with the Great Contraction, the Financial Crisis and the Great Recession being most commonly used.)

What did it mean to you and your farm? What lessons have you drawn from it, or have you forgotten all about it and moved on?

Over the next few weeks I’m going to take a look back at the meltdown to try to uncover what we should have learned about agricultural markets and agricultural risk management.

The financial and economic collapse that began in 2007, tumbled through 2008 and slammed into a bottom in 2009 had major impacts on farmers.

Other stories in this series:

Do you remember hard red spring wheat going from $22 per bushel to $8 in what seemed like a blink? That was a big deal if you grew wheat or if you had to buy feed for livestock.

Do you remember banks yanking and slashing operating lines and refusing to write letters of credit? That messed up a lot of marketing plans and sent some farmers, grain companies and others into insolvency.

Do you remember international markets grinding to a halt as the world’s financial system had a heart attack? Cargo ships became orphaned, parked in harbours or at sea, with no loads to pick up and deliver or filled with loads that buyers couldn’t pay for. All of a sudden the bull market in grains, which had kicked off just a couple of years earlier, seemed to collapse and all the comfy assumptions many had been building their farms upon seemed to disintegrate.

I remember that time well because I’d been obsessively following the situation since the first tremors hit in 2007 with the Northern Rock bank run in the United Kingdom, and those financial reverberations are always stitched together in my mind with the incredible boom in crop prices and the birth of my first daughter, with whom I took an eight-month parental leave. I’ll always remember the crisis as me sitting in a rocker, trying to keep a baby asleep, watching hours of Bloomberg TV and seeing the world come apart.

When I got back to work in October 2008 I jumped into covering the situation for the paper, which occupied a lot of my time for a couple of years.

But the commodity boom returned with a vengeance. Most farmers survived what turned out, for agriculture, to be a temporary situation. Land prices continued to escalate and crop farmers raked in generally excellent profits until 2013.

The world’s advanced economies continued to suffer great stresses and political turmoil, but farming escaped most of the woe, continuing to enjoy the best time since the 1970s.

It was like 2008-09 didn’t matter.

But I think it does, still today, and we need to take a look back at it. We might not be remembering some things that we need to recall.

In preparation for this series of columns, I contacted a number of long-time agricultural markets players and analysts to get their thoughts on the crisis and its resolution. I’m going to write about their views on various issues over the coming weeks. I’m hoping the series can be a helpful reminder about the risks farmers might be facing without realizing it and what happens when those risks suddenly appear.

They say, “once bitten, twice shy,” but they also say, “out of sight, out of mind.”

I’m hoping to encourage the former and to help bring the crisis back into sight.

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Comments

  • ed

    Locking in B-trains of $17/bushel canola and receiving $12.64/bushel for every single bushel of my #2 15.5 protein red spring wheat through the Canadian Wheat Board because they did the same in wheat. How sweet was that. Ten years later and it’s all bad!

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