Sunset on Farming? Not Yet

"Glory Days Fade for U.S. Farmers," declares the headline on a Wall Street Journal article Wednesday. But within the article itself are indications that the glory days may continue for some time to come.

Prices of corn and soybeans have fallen by half since midsummer, while other food crops have dropped as well. Meanwhile, farmers' costs, particularly of seed and fertilizer, have continued to rise.

These phenomena, the Journal says, may "usher to an end, by next year, one of the most flush periods in American farm history." This has been an era that saw farm income nearly double in just two years. But now, "farmers fear a big drop in next year's profits."

But there are indications that any such drop, even if it were to occur, might be short-lived. For one thing, as the Journal notes, farmers' balance sheets are strong—their debt levels are historically low.

But mainly, the overall, long-term outlook for crop demand remains bullish. The Journal notes that federal mandates for ethanol production will increase next year. That will tend to push prices up. But more crucially, and mentioned by the Journal only in an offhand fashion, "economists think global demand for U.S. crops will remain robust despite recent economic troubles."

Of course, a serious global depression could change that—but recall that before the current financial crisis, one of the biggest worries among economists and politicians was crop shortages. Food riots were breaking out in Haiti and elsewhere, and food inflation was a big problem in developed nations—it still is.

"Still," the Journal insists, "U.S. growers clearly face a riskier, more volatile environment in which to make bets on what to grow and how much."

True, to a point. Even China's economy has slowed considerably. But more people in China and elsewhere are eating a lot more meat and drinking a lot more milk, and barring a catastrophe, that trend, which pushes up demand for feed crops, is likely to continue.  

None of which is to say that crop prices will rebound to their summer highs and then stay there, or rise even further, for years. But they could. That scenario, at any rate, seems more likely than one in which depressed prices start pushing American grain farmers into bankruptcy.

Indeed, the Journal's article ends with a quote from the CEO of an agricultural lender: "I still think the golden era of agriculture will be with us for another five plus years."