All major U.S. agricultural program crops -- corn, barley, sorghum,
oats, wheat, rice, and soybeans -- have exhibited extreme price
volatility since mid-2007, while rising to record or near-record
levels in early 2008. Several international organisations have
announced that the sharply rising commodity prices are likely to
have dire consequences for the world's vulnerable populations,
particularly in import-dependent, less developed nations. In the
United States, high commodity prices have pushed farm income to
successive annual records and have sharply lowered government farm
program costs, but they have also stoked the flames of food price
inflation and have raised costs for livestock producers and food
processors. In addition, high, unexpectedly volatile prices have
increased the risk and costs associated with grain merchandising.
In particular, they have dramatically increased the cost of routine
hedging activities (i.e., pricing commodities for purchase,
delivery, or use at some future date) at commodity futures
exchanges and, as a result, have diminished "forward contracting"
opportunities for grain and oilseed producers who are eager to take
advantage of record high market prices. For some crops
(particularly for wheat and rice), the price increases are likely
to be relatively short-term in nature and are due to
weather-related crop shortfalls in major producer and consumer
countries, a weak U.S. dollar that has helped spark large increases
in U.S. exports, a bidding war among major U.S. crops for land in
the months leading up to spring planting in 2008, and the often
perverse price effects resulting from international policy
responses by several major exporting and importing nations to
protect their domestic markets. Assuming a return to normal
weather, these factors will likely self-correct within two growing
seasons as global supplies are replenished and prices moderate. For
coarse grains (corn, sorghum, barley, oats, and rye), oilseeds, and
oilseed products (e.g., vegetable oil and meal), the price
increases have also been due to strong, sustained demand deriving
from two sources: robust income growth in developing countries
(e.g., China and India), which has contributed to increased demand
for meat products and the feed grains needed to produce that meat;
and growing agricultural feedstock demand to meet large increases
in government biofuel-usage mandates or goals in the United States,
the European Union, and other countries. Market analysts, including
the United Nations' Food and Agricultural Organization (FAO), are
predicting record global grain and oilseed production in 2008 in
response to the high market prices. However, given the overall
strength in demand growth, most market analysts predict that when
commodity supplies eventually recover and prices moderate from
current high levels, the new equilibrium prices will be
significantly higher than has traditionally been observed during
periods of market balance. This book examines the causes,
consequences, and outlook for prices of the major U.S. program
crops
General
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