Thursday, January 31, 2008

Farmers expand cropland to cash in on grain boom

Farmers are moving to cash in on "the biggest global grain boom in decades," but there are still worries about how long the good grain times will last, reports Lauren Etter for the Wall Street Journal (which ran the chart of futures prices).

Etter explains that the boom is the result of a jump in biofuel production and an increased demand for grain — such as corn, wheat, soybeans, barley and sunflowers — in China and India. Food prices have gone up, too. Still, there are plenty of risks, and experts predict near-term volatility in the market.

"Farmland prices have climbed more than 20 percent over the past year in many Midwestern states, so the many growers who lease land are shelling out higher rents," Etter writes. "Some seed prices have jumped 30 percent, and fertilizer prices have doubled nearly across the board. Nocturnal thieves are stealing grains from unlocked bins. And ever looming is the prospect of a drought, which could push prices even higher, sending shock waves through global grain markets."

Etter adds that although a recession should not derail rising food prices, economic worries still have farmers asking: "Could the grain boom be another bubble like dot-com and housing?" Regardless, many farmers are changing fields over to grains and hoping for the best. (Read more)

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