Managing Great Times and Great Risks in 2008 Economy Slowing, But Not Stalling

times, but more uncertainty seems to be hallmarks for 2008. Agriculture is experiencing the best times since the 1970s. It’s finally a boom for Indiana farmers and agribusinesses. Farm incomes are up. Equity is way up due to a 17% increase in land values. Farm families on average are on their strongest financial footing in 50 years. These better times are being driven by a worldwide surge in the use of grains and oilseeds for biofuels that has eliminated grain surpluses. But two other factors are important as well. World economic growth has been robust and is spurring added food demand, and the value of the U.S. dollar is depressed making the U.S. a haven for the world’s food buyers. The implications continue to reverberate throughout the ag sector. Higher farm margins and incomes mean strong demand for inputs. Input prices will rise sharply in 2008 raising crop input costs by 17%. Cash rents are also expected to move sharply upward by maybe 15% or more. Both higher inputs and rents may compress potential margins. Added to those concerns, wildly volatile crop prices and virtually no government safety net mean that crop margins may both have high return potential, but will also expose producers margins to any downturns. That’s the dynamic, but high risk business environment agriculture will experience in 2008. Managing Great Times and Great Risks in 2008