|
Spring is a time of transition—leaves bud, the
grass hints at green, and farmers are preparing for
spring planting of crops that grow over the summer (such
as corn, soybeans, and rice). It is also a time of uncertainty,
as farmers and others try to get a sense of how the
new season will unfold. Key data presented in USDA's
annual Prospective Plantings report (released
March 31) and other publications are helpful assessment
tools. Still, questions remain. What will farmers plant,
and how will markets respond?
At first glance, uncertainty this year appears particularly
keen. Fluctuating energy prices in late winter and early
spring have implications for farm production costs,
including diesel fuel, irrigation pumping, and fertilizer.
Prolonged dryness in the western U.S. and parts of the
Great Plains complicates planting in those regions.
Heightened competition from foreign countries in several
markets—Brazil for soybeans, Russia and Ukraine
for wheat, and China for several commodities—raises
questions of how the global marketplace will shape up
in 2003.
While weather and international factors are obvious
sources of uncertainty, government policies affecting
agriculture—including trade, commodity, and environmental
policies—can be sources of uncertainty, too. Indeed,
a USDA survey in the late 1990s indicated that policy
and regulatory changes were perceived by farmers to
rank highest among the risks they faced.
 |
But are times more uncertain now than in the past?
Uncertainty in agricultural markets can be measured
in many different ways, but variability in commodity
prices is one "bottom-line" way to assess
the situation. Using prices for corn, a major crop planted
in the spring, the answer appears to be "no."
Variability in corn prices was quite high during the
1920s and 1930s, largely due to the collapse in grain
prices in the post-World War I period and low yields
in several years. Variability was low during the 1950s
and 1960s, a period characterized by high government
support, fairly stable yields, and consistent demand.
From 1990 to the present, corn price variability appears
to be near its long-term average.
Over time, of course, the prices an individual producer
receives may be more or less variable than those at
the aggregate level. Whatever comes, spring is a time
for renewal…and, for farmers…a time to gather
information and analyze it to best position themselves
to weather the ups and downs of the market.
Joy Harwood
Deputy Director for Market Analysis & Outlook
Market and Trade Economics Division, Economic Research
Service
|
