Grain Grab

by Richard Oswald

City folks tend to see farmers as wealthy landowners who dig in the soil for something nearly as good as gold. Really though, it’s the value of yellow grain and growing things that decide whether farmers mine bottomless wealth on their land, or just get the shaft.

For farmers there’s no such thing as a cost of living increase. We don’t get fringe benefits or health care unless we pay for it. Retirement is funded, fully or not, by the family farm. On-thejob training is the one thing we always get whether we want it or not. Mother Nature and our fellow man never get tired of teaching us new tricks. That’s why, when markets offer a profit, we grab it.

Farmers aren’t the only ones snatching cash out of today’s markets. Lately there’s been a little more grain grabbing than usual on the part of non-farmer speculators who’ve figured out that with world populations growing and currencies aflutter, commodities are in big demand. (10)

My corn crop is now almost as good as …you know what.

Most people don’t realize that a farm depression hit years before the stock market crash of ’29, or the Dust Bowl. That’s what happened during the First World War when prices for farm goods soared–then soured. The world was a hungry place, and with so much land in Europe being tilled into killing fields, America was a global breadbasket. In terms of inflation- corrected dollars, crops were worth even more then than they are now. It didn’t last for long.

Once the fighting in Europe stopped, things got bad here when we lost much of the outside market for our produce.

As Europe rebuilt after the war their own farmers went back to work under the protection of peace and import tariffs. Angry, broke American farmers couldn’t grasp why their markets had collapsed. The only reasonable course of action for farmers seemed to be gathering into mobs to storm the statehouse.

What goes around always seems to come around.

That’s why the Governor of Iowa had to keep order in the Hawkeye state with the National Guard and machine gun emplacements on rural roads. (2)

This time it’s not war haunting us but the value of our currency coupled with new world demand for food and fuel. What it all boils down to is that our food and the almighty dollar are cheap enough to burn.

As Russian droughts, Argentine floods, weather in Australia, (7) and rising standards of living in parts of the job-rich third world put pressure on local food supplies; it’s easy for consumers and Congress to point at nonfood uses for agricultural products like biofuel as being bad. We have tariffs, for now, protecting our ethanol industry from cheap South American sugar alcohol. Some people think that needs to stop, along with the tax credits refiners and Big Oil receive for ethanol and blended gasoline. Could we see a negative impact on farm income just like ‘21?

Regardless of what Congress may or may not do, for now everyone seems to be bullish. Farmers are bidding new record prices for farmland (3) while others bid equally high on what it will grow. Some people are even starting to worry about fund money speculation on land. Why not? They’ve worked their sleight of hand in our financial markets. Maybe agricultural funny-money is next.

In the news lately is little known grain trading company Gavilon. (6) Gavilon has been buying up regional grain concerns across the Midwest. (1) In America, big corporate fish eat smaller ones all the time. But what’s interesting about Gavilon is that it’s been swallowed by a Grouper called George Soros and a few of his partners who are betting that world grain supplies(5) will be tight no matter what. They might be right (especially if they get the upper hand.)

Soros is a world class speculator. Guys like him come and go with every price peak in commodities, currencies, or stock markets. It’s happened before with Ferruzi (8) the Hunt brothers (9), Billie Sol Estes, and countless others (11) who wanted to corner ag markets.

Generally speculators just buy and sell futures paper over computer terminals—they can be long one minute, short the next. But Gavilon is buying fixed assets like grain elevators and fertilizer facilities. They aren’t just buying on paper, and they aren’t just buying grain. And they aren’t alone. A lot of big grain concerns have been expanding their control of raw commodities for everything from food to biofuels. (4)

Even the basic elements we need to get grain crops sprouted and growing aren’t safe from opportunists.

Critical to US crop production, phosphate is an essential element for all life on earth. Most of the world supply is held in 3 nations, China, Morocco, and the US. Estimates are that mines containing our domestic supplies of rock phosphate will be depleted in 30 years. While China places tariffs on exports of their own phosphate, apparently speculating that values will rise, they are importing as much as possible from our mines in Florida.

Could they be trying to corner the market?

The cheaper the dollar, the cheaper all our assets look to international buyers. The bad news is that foreign customers are gobbling it up with the money they earned from the exported jobs of our unemployed 9.8%.

Today’s farm gate prices aren’t all about speculation.

The good news is we have demand for the things we grow—and profits! Of course, it didn’t offer much help for keeping food prices low when investment bankers placed their bets and took a sledge hammer to the piggy bank, smashing the US dollar in the bargain.

Farmers are no different than anyone else. Most of us only want a good life and decent living. But that’s the trouble with war, and speculators.

They just want to make a killing. RO

(1) http://sl.farmonline.com.au/news/nationalrural/grains-and-cropping/general/who-is-gavilon/1797640.aspx
(2) http://www.desmoines-register.com/article/20101128/NEWS/311290010/-1/LIFE04/Iowa-s-hardest-years-Stories-from-the-farms-during-the-Great-Depressionhttp://www.omaha.com/article/20100927/MONEY/709279962
(3) http://www.desmoinesregister.com/article/20101205/BUSINESS01/12050343/1001/
(4) http://www.prnewswire.com/newsreleases/first-argus-indexed-biomass-dealconcluded-105355258.html
(5) http://www.agrimoney.com/news/awb-snares-soros-backed-gavilon-for-grainsdeal—1526.html
(6) http://www.meattradenewsdaily.co.uk/news/071010/usa_expnding_farm_trading_company_.aspx
(7) http://www.weeklytimesnow.com.au/article/2010/10/25/247561_grain-andhay.html
(8) http://www.time.com/time/magazine/article/0,9171,958190,00.html
(9) http://www.time.com/time/magazine/article/0,9171,947924,00.html
(10) ht tp://www.bloomberg.com/news/2010-10-31/food-inflation-rising-ascooking-oil-poised-to-catch-up-with-graingains.htm
(11) http://www.time.com/time/magazine/article/0,9171,898315,00.html


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