Farmers advised to buy fuel, fertilizer now

Capital Press 12/9/08

LITTLE ROCK, Ark. (AP) - Prices for diesel fuel and fertilizer are about as low as they are going to go, and an agricultural consultant is advising farmers to buy their supplies now for the coming year.

Richard Brock, president of Milwaukee-based Brock Associates, told rice farmers at the 2008 Rice Outlook Conference on Monday that price volatility is likely to continue and that growers should lock in low prices when they can.

Brock attributed swings in commodity prices earlier this year to cash from index funds. He said futures purchases by one particular fund, the Goldman Sachs Commodity Index, have been largely responsible for driving agricultural-commodity prices up, and then down. Brock said those price swings mirrored the price of crude oil.

Brock says one result is that many farmers and commodity merchants have stopped using futures and options. He said the markets will lose their usefulness for price discovery and hedging if rules for index funds are not changed.

Arkansas is the nation's top rice grower, producing about half of the U.S. crop. The 2007 harvest was worth more than $1 billion.

Jim Wiesemeyer, a vice president in the Washington bureau of Memphis, Tenn.-based Informa Economics Inc., said he thinks President-elect Barack Obama will lift the U.S. trade embargo against Cuba, which would open an important market to Arkansas growers.

"That's probably one thing that could give you a good, sustained bump in your cash price," Wiesemeyer told the rice growers.

Rice prices have been dropping since May, after setting a record season-average high of about $15 per 100 pounds, said Nathan Childs, senior rice-market analyst with the U.S. Department of Agriculture's Economic Research Service.

When rice prices went up last year, the spike was brought by artificial shortages created by export bans imposed by such countries as Egypt and India, Childs said.

"We see a continued decline in U.S. and global prices" well through the 2009-10 rice marketing year, which begins in August and ends in July, Childs said.

He said people cutting their household budgets during the economic crisis may wind up eating more rice, which would improve prices for farmers.

Brock said that the recent Chapter 11 bankruptcy filings by Pilgrim's Pride, a chicken producer based in Pittsburg, Texas, and VeraSun Energy, an ethanol producer based in Sioux Falls, S.D., came about because of poor hedging positions. Pilgrim's Pride has 2,900 Arkansas workers, plus hundreds of contract farmers in the state.

More than 750 attended this year's rice conference, including growers, millers, merchants and those in related businesses. The event rotates annually among the six U.S. rice-producing states: Arkansas, California, Louisiana, Mississippi, Missouri and Texas.

The Associated Press