01/14/09 Commodities and China

Farmers trying to figure out trends for commodities in an effort to decide crop strategies might be advised to consult a ouija board as opposed to using logic. World economic health for 2009 could be the number one challenge for the agricultural industry that enjoyed a reasonably robust 2008. In search of a 'logical" explanation for extreme commodity swings might be found with the Chinese. Early in 2008, commodity investors became enthusiastic because the Chinese were buying immense amounts of raw materials in preparation for the 2008 Olympics. It was as though they were trying to put on a "look how well we're doing" show. But the competitions in Beijing are long gone and the Chinese, along with the rest of Asia have stopped their buying frenzies. They have discovered that worldwide recession is upon us. Agriculture economist Joe Glauber: "The real issue will be countries like China which have been such drivers in the world economy. The real question will be whether the world recession hits and really adversely affects their growth and if that's the case then I think the situation may be worse than a lot of people think." A wider world recession could mean a cutback on Ag sales to China which could mean lower prices to U.S. farmers. On the other hand, a growing world population, people's improving diets, shrinking land that can be used for crops and ethanol production make for a positive agricultural outlook.