It was just a few years ago when grain prices were high, and some believed those price levels were the new normal. Over the past decade, beef prices hit high marks and pork prices cycled up. Ag economists warned there was no guarantee that it truly was a new day, and that high price levels were the new normal.
One crusty ag economist insisted it was just another temporary price bubble and noted there have only been about four high-price bubbles lasting at least a few years in the last century.
The bad news is, it looks like the crusty old ag economist was right. It’s apparent that the days of super-high prices were indeed a bubble that burst. The good news is that every time prices have tanked, they have rebounded. The questions is, how soon? That typically depends on circumstances related to each downturn.
Supply and demand
One constant is supply and demand. When farm prices are low, it’s usually because there’s too much supply of the commodity and too little demand, or no increased demand for an increasing amount of product.
One additional factor today is that consumer desires are changing, increasing demand for certain types of products, often specialty products, and decreasing demand for others, often old standby products.
Here are a few observations on the current price malaise:
Are things really that bad for dairy farmers? One person called to ask recently when they saw a front page story indicating that Kelsay and Son Dairy would quit the dairy business at the end of the year. Joe and Russ Kelsay are the current generation farming land that’s been in the family for roughly 180 years. As far as anybody knows, there have always been dairy cows there. It appears there won’t be come the end of the year. Joe noted in the Daily Journal article that the loss of a buyer for their milk, plus continued economic losses based on low milk prices, forced the decision.
Yes, things are that bad for many dairy farmers — there’s just too much milk worldwide. Yet someone reminded me Aug. 22 was “World Plant Milk Day”; I’m not making this up. Don’t despair, though, even plant milk people are taking a hit. People are turning away from almond milk, saying water is too valuable to use growing almonds in California.
Could hogs hit $8 per hundredweight again? Let’s hope not — but Chris Hurt, Purdue University Extension ag economist, says there are parallels between the current hog situation and 1998, when hog prices hit that level. Again, sometimes we’re too good at what we do. Hog production is up.
I sat at a sale barn recently and watched 260-pound hogs sell for 36 cents per pound. Meanwhile, 80-pound goats brought $2.50 per pound. What’s wrong with this picture?
How low will soybeans go? The problem with soybeans is also more supply than demand, this time because a trade war is cutting off demand for U.S. beans. Things like trade wars don’t last forever, but recovery can take much longer than the event itself. Remember President Carter’s Russian trade embargo?
There are bright spots. People pay premiums for certain products. While waiting for supply and demand to correct itself, it might pay to look for a niche market.
Eventually, farm prices will reverse course and return to profitable levels. As one beleaguered dairy farmer says, however, it’s just not going to be today.