By Roy Smith
Looking back at what happened then
might give us some idea of what is
ahead. I caution that the past can’t H igh oil prices helped cause 1970s stagflation, but federal fiscal policy made it worse.
predict the future. All factors aren’t
exactly the same. So the end result
could be completely different. of 1973. In the next 15 years, corn afloat, supporting two children and
Long-term grain market charts futures had four price peaks over the financial burdens of beginning a
show that prices shifted dramati- $3.50. Soybean futures made five farm business. Conservative val-
cally higher in 1972 and 1973. This peaks over $9.00. None of these ex- ues instilled in those who survived
was caused by underlying economic ceeded the summer peak in 1973. All served us well when the bottom fell
conditions – not by poor crops. The but the soybean rally in 1977 were out of the ag economy.
great Russian grain purchase was an caused by droughts in 1974, 1980,
important trigger. A neighbor who 1983, and 1988. The price of corn wha T The fu Ture holds
sold his soybeans at harvest in 1972 didn’t exceed the ’73 peak until the The farm economic crisis of the
for $3 thought he had the world by summer of 1996. Soybeans did not 1980s was caused by high land values
the tail. By the time I harvested mine exceed the ’73 price until this year. and interest rates soaring without
in December, the price was $4. By Bad economic conditions didn’t similar grain price increases. The
spring, cash beans were over $10. cause a big break in grain prices. stock market went through a period
Soybean futures prices never did go of no growth. Economic crises are
Treading in char Ted wa Ters? back under the old plateau of $4 per not generally good for grain prices.
It’s easy to draw parallels between bushel. Cash prices were under $4 I don’t expect the historic prices set
the big shift in prices then and what briefly in the winter of 2002. Corn earlier this year to be exceeded soon.
happened in 2007 and early 2008. futures prices challenged the old Nonetheless, the USDA projects
Recent similar price appreciation plateau of $1.50 briefly in the winter tight supplies for the foreseeable
was based on a weakening dollar and of 1986-87. A local landowner sold future. Any future reduction in yields
biofuels. If the economy now goes corn in December 1986 for $1.16! could result in a price bounce back
into stagflation as it did back then, Such low prices didn’t last long. close to historic levels, as we experi-
the old charts of grain prices should I remember the 1970s well. Life enced in 1974.
be an indicator of what is ahead. was tough on our farm. While much I am more concerned about
Both soybeans and corn made of agriculture enjoyed the best years inflation in input costs and living
historic price peaks in the summer ever, my area suffered four years of expenses. Government borrowing to
extreme drought. I struggled to keep finance bailouts will put inflationary
pressure on everything we buy. That
will be harder on farmers’ financial
condition than on grain prices.
Some market watchers predict that the current financial situation will result in a period of stagflation similar to 30 years ago.
Photograph: Doug Hetherington
learn more www.soyroy.com
References:
Archives