Gone In 60 Seconds
This story appears in the New York Times. You could change the names, the prices, the location to adapt it to pretty much anywhere over here. Essentially the story is the same. Is it greed, stupidity or just plain bad luck? You wait all your life for wheat to go to $5/bushel, then one day it goes to $10/bushel. Then what do you do? Sell none of course....
Farmers said it wouldn't last, and they were right. They just didn't think it would end so soon.
When the price of wheat, corn, soybeans and just about anything grown in the ground began leaping skyward two years ago, farmers were pleased, of course. But generally they refused to believe that the good times would be permanent. They had seen too many booms that were inevitably followed by busts.
Now, with the suddenness of a hailstorm flattening a field, hard times are back on the American farmstead. The price paid for crops is dropping much faster than the cost of growing them.
The government reported this week that the cost of goods and services nationwide fell by a record amount in October as frantic businesses tried to lure customers. While lower prices are good for consumers in the short run, a prolonged stretch of deflation would wreak havoc as companies struggled to stay afloat.
In this lonesome stretch near the Texas border, farmers are getting an early taste of a deflationary world. They have finished planting next year’s winter wheat, turning the fields a brilliant emerald green. But it cost about $6 a bushel in fuel, seed and fertilizer to put the crop in. That is $1 more than they could sell it for today, and never mind other expenses like renting land.
This looming loss sharpens their regret that they did not unload more of this year’s crop back when they harvested it in May. They knew the boom would end, but not so soon.
“I waited all my life for wheat to go from $4 to $5,” said Jimmy Wayne Kinder, a fourth-generation farmer. “Then it hit $10, and we were all asking, ‘What are we going to do?’ ”
Mr. Kinder, who farms about 5,000 acres with his father, James Kinder Jr., and his brother, Kevin, held onto much of his wheat, hoping that prices would go still higher. Instead, they plunged. “I lay in bed at night kicking myself,” Mr. Kinder said.
Oklahoma exports two-thirds of its wheat, more than the country as a whole. That worked to the state’s advantage in 2007 and the first half of 2008, as a combination of bad harvests in Australia, the cheap dollar and rising Asian consumption created intense international demand.
The state’s farmers responded, naturally enough, by ramping up production. Because of better weather and therefore a better yield, 166.5 million bushels of wheat were harvested in Oklahoma this spring, a 10-year high. And because of the high prices, the crop was valued for the first time at more than $1 billion, nearly twice as much as 2007 and nearly three times as much as 2006.
“They made a killing,” said Kim Anderson, a grain economist at Oklahoma State University.
Assuming, that is, they sold. The farmers who cashed in at the right moment are acquiring legendary status. “I know a fellow that sold some wheat for $12 a bushel. That was almost beyond belief,” said James Kinder, 74.
But his son suspects that most were like the Kinder family: they either did not sell or did not sell enough.
The Kinders still have about 40 percent of their wheat, stored on the farm and in commercial grain facilities. “Farmers are terrible marketers,” said Jimmy Wayne Kinder, 50. “We fall in love with our crop.”
It was the same misguided optimism that caused homeowners to think their houses would always keep increasing at a 20 percent annual clip. Farmers across the country fell prey to it.
David Kanable at the Oregon Farm Center, a mill near Madison, Wis., was paying $7.25 a bushel for corn in June. “We never had one farmer lock in at that price. They wanted $8,” Mr. Kanable said. On Thursday, the mill was paying $3.17 a bushel.
Farmers said it wouldn't last, and they were right. They just didn't think it would end so soon.
When the price of wheat, corn, soybeans and just about anything grown in the ground began leaping skyward two years ago, farmers were pleased, of course. But generally they refused to believe that the good times would be permanent. They had seen too many booms that were inevitably followed by busts.
Now, with the suddenness of a hailstorm flattening a field, hard times are back on the American farmstead. The price paid for crops is dropping much faster than the cost of growing them.
The government reported this week that the cost of goods and services nationwide fell by a record amount in October as frantic businesses tried to lure customers. While lower prices are good for consumers in the short run, a prolonged stretch of deflation would wreak havoc as companies struggled to stay afloat.
In this lonesome stretch near the Texas border, farmers are getting an early taste of a deflationary world. They have finished planting next year’s winter wheat, turning the fields a brilliant emerald green. But it cost about $6 a bushel in fuel, seed and fertilizer to put the crop in. That is $1 more than they could sell it for today, and never mind other expenses like renting land.
This looming loss sharpens their regret that they did not unload more of this year’s crop back when they harvested it in May. They knew the boom would end, but not so soon.
“I waited all my life for wheat to go from $4 to $5,” said Jimmy Wayne Kinder, a fourth-generation farmer. “Then it hit $10, and we were all asking, ‘What are we going to do?’ ”
Mr. Kinder, who farms about 5,000 acres with his father, James Kinder Jr., and his brother, Kevin, held onto much of his wheat, hoping that prices would go still higher. Instead, they plunged. “I lay in bed at night kicking myself,” Mr. Kinder said.
Oklahoma exports two-thirds of its wheat, more than the country as a whole. That worked to the state’s advantage in 2007 and the first half of 2008, as a combination of bad harvests in Australia, the cheap dollar and rising Asian consumption created intense international demand.
The state’s farmers responded, naturally enough, by ramping up production. Because of better weather and therefore a better yield, 166.5 million bushels of wheat were harvested in Oklahoma this spring, a 10-year high. And because of the high prices, the crop was valued for the first time at more than $1 billion, nearly twice as much as 2007 and nearly three times as much as 2006.
“They made a killing,” said Kim Anderson, a grain economist at Oklahoma State University.
Assuming, that is, they sold. The farmers who cashed in at the right moment are acquiring legendary status. “I know a fellow that sold some wheat for $12 a bushel. That was almost beyond belief,” said James Kinder, 74.
But his son suspects that most were like the Kinder family: they either did not sell or did not sell enough.
The Kinders still have about 40 percent of their wheat, stored on the farm and in commercial grain facilities. “Farmers are terrible marketers,” said Jimmy Wayne Kinder, 50. “We fall in love with our crop.”
It was the same misguided optimism that caused homeowners to think their houses would always keep increasing at a 20 percent annual clip. Farmers across the country fell prey to it.
David Kanable at the Oregon Farm Center, a mill near Madison, Wis., was paying $7.25 a bushel for corn in June. “We never had one farmer lock in at that price. They wanted $8,” Mr. Kanable said. On Thursday, the mill was paying $3.17 a bushel.
