forecast

Dr. Steve Meyers, Paragon Economics, shares his industry outlook on producer profitability based on use of good risk management practices.

We have moved back into a period where if you are buying grain and selling hogs on the cash market, you're probably loosing money. The issue is not the price of pigs, the issue is the cost of production.

     Worldwide demand for natural resouces, value-added food items and consumer goods is down sharply as a dramatic slowdown of the world's largest economies continues.  The contraction phase of this worldwide recession is still underway at the beginning of 2009 and will likely continue well into at least the first quarter. 

     One of the reasons it is hard to predict when the recession will bottom out is that there are most likely still "land-mines" of hidden corruption yet to be exposed and absorbed as losses by the remaining productive sectors.  These losses occur in business processes and supply chains that are linked, so that a kind of domino effect or snowballing contraction must take place before the full impact of each phase of the slowdown is fully realized.  This takes time and tends to come in waves, as tipping points are finally breeched.

     Sometimes its hard to tell if recent events, like the generalized global economic meltdown, cast a shadow that is a vapor and will burn off as the sun comes out again, or whether they are a harbinger of a more persistent, new strategic environment in the global market and political system.

     There is certainly a feeling in the air that some substantial things have changed but time will tell if they are persistent or even fully realized.  Some of the things which form the emerging global situation that U.S. agricultural will operate in include: