Hey, guys and gals, we made it!
If you’re reading this it means you got to the end of 2009, a rough and tumble and treacherous year that has ravaged many in the ag markets and enriched a few. Hog farmers are the most ravaged as a class. Flax growers are perhaps the most perturbed because of the Triffid mess, if not suffering anything like the same economic stress. Cattle producers are just slowly suffering in relative silence.
Those who harvested those great big crops this autumn and got them in the bin in good condition are among the winners, getting better-than-expected (or justified by the fundamentals) prices for the past couple of months as liquidity has washed back into all markets. Many didn’t get those huge crops, or didn’t get their huge crops in in time to avoid the fall’s bad weather, and aren’t making out as well as the charts would suggest their crops are worth.
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
But when I say we made it, I’m talking about the appearence of ag commodity prices in many columnists’ lists of the Big Developments of the past decade. We made it to public attention. The huge run-up of crop prices in 2007-08 and the subsequent collapse have appeared in many lists of notable events of the 00s. Or the oughts. Or the noughts. Or the naughties. Or whatever people will eventually call this decade. (Yes, pedants, I know the decade doesn’t officially end until Jan. 1 2011, but many are treating this as the end of the decade and they’re who I am referring to.) High food prices and food riots made a lot of urbanites around the world realize that food isn’t always cheap, and this was a stunning realization for those used to always-discounted nutrition.
Biofuels are also getting a few mentions. On Canadian lists you can probably find some mention of the BSE disaster.
It’s hard to sum up the decade of ag prices in any easy way, with flaccid prices dominating the first half and a spiral and slump dominating the crop markets in the last 30 percent of the 00s. But it’s easier to sum up the situation when you slot in crop prices with the rest of the commodities complex: crop prices got swept up in the historic commodity price rally that began during the swan song of the last millenium’s finishing equities rally and carried on from there. While the rise in many commodities began by 2000, it wasn’t until the mid-2000s that crop prices ignited. Why that took so long to occur isn’t simple to explain, but gurus like Jim Rogers were eventually proven right that the ag commodities would soar to historically high prices. To the chagrin of many waiting for this to happen – year after year of waiting – when those big prices came it was for only a few months, and many missed out on much of the rally, either pre-pricing too early or waiting too late. But in general, 2007-08 put a lot of money back into the farm economy and allowed many to catch up a little from bad early years of the decade.
What of 2009? On the charts it looks rangebound:
But that’s only in relation to the eruptions of 2008. Canola here generally moved between $350/tonne and $475 per tonne during the year and on a shorter term chart it wouldn’t look too rangebound. And there’s a few stories being told here without a clear sense of where it’s going to go from here. With all the debate over what’s making the equity markets rise so steadily and dramatically (Real economic recovery? Oceans of government money creating a bubble?) and how much that is dragging along the ags, crop prices enter 2010 with a lot of question markets.
Hog prices gave producers two big surprises this year: one bad, one good. The bad one occurred when the summer rally fizzled before it got going, during the market turmoil caused by H1N1. Russia, China and a bunch of other countries shut their borders and backed up pork throughout North America. 
But then later in the year – too late to save many – hog prices did what they almost never do: they experienced a countercyclical rally, rising in the fourth quarter when they almost invariably fall. That’s been a lifeline to many producers. Of course, for weanling producers cut off from the market that actually buys their piglets, North American prices don’t mean squat if you can’t sell your animals at all, and country of origin labelling was the biggest hog industry story for southern Manitoba.
Throughout the year, the dollar has kept everyone guessing, and hasn’t undone the damage done by its dramatic rise a couple of years ago. Here’s a chart of what it did: 
Unfortunately, what it did was rose during much of the year, after selling off in the late 2008 slump, undermining ag prices set on the world market.
Farmers are caught in the middle of the unsettled commodity complex, producing grain and meat commodities, buying energy and steel based commodities, and it’s been hard both this past year and over the past few years to figure out whether or not ag prices have been strong in relation to the commodities consumed in producing crops and meat. That makes it hard on every farm to assess whether the overall situation is responsible for the situation on their farm, or just an isolated situation, good or bad.
The world seems much the same. On one of the lists of big events in the 2000s, by Doug Saunders of the Globe and Mail, the crop price surge was noted, and he found that the world had generally gotten a lot better this decade from the situation it ended the 1990s in, with lots of developing countries developing faster than anyone had predicted and far less war in the world than most had predicted in 1999. Conversely, Paul Krugman in a lookback piece sees little but disaster: recession, George W. Bush, 9/11, Iraq, more George W. Bush, an enormous financial and economic collapse.
It seems no less unsettled with the state of the farm economy. Has it gotten better? Has it unravelled? It’s hard to make a general statement. But there’s no question it’s been a dramatic decade. And it’s good to get 2009 behind us and hope for a more generally positive 2010 and a decade of steadily rising crop and livestock prices (and falling energy and fertilizer prices).
With that, I wish you all a Happy New Year, and with my friends Doug and Aaron in mind, I wish the Scots a cheery Hogmanay.
