Howdy friends and neighbors. I keep hearing over and over again that food prices are shooting through the roof. Our economy is in a depression and food prices are getting too high. One news report said the government in Haiti has fallen due to rioting over the price of food. And of course, us highly subsidized farmers are to blame. That's how the typical mainstream media will spin the story. And not just mainstream media. Every farm magazine and agriculture journal that I pick up talks about the "good times" we in agriculture are having. Average Americans think farmers are just getting fifthly rich as commodity prices are at record highs.



Well, here is my economics lesson for the week. In a supply and demand system, as we are in with our agriculture products, if supply is high, then prices are down. If there is no supply, then prices are high. I can't speak for the corn and bean boys because the ethanol boom has their demand high at the present time, but in wheat and cattle country, the record high price of wheat is a direct result of no one having any to sell! Wheat could be ninety dollars a bushel right now and only the hedge funds, which are invested heavily right now, would be making any money because wheat farmers don't have any wheat to sell. I don't know of many wheat farmers that just got dirty rich last year because they sold about all they had at about half of the current price. Not to mention the fact that many wheat farmers and local grain elevators stretched the credit lines as they forward contracted this year's crop at prices that are three to five dollars out of the money right now.



Please stay with me because I know what I just wrote is very confusing. The process of forward contracting and hedging is complicated. Many others, including myself, thought last fall that five, six or seven dollar wheat was a good price for what we would harvest this summer. So we hedged on the futures or forward contracted with an elevator and the elevator hedged on the futures (future contracts are for 5000 bushels). Let's say we hedged on the futures at seven dollars. Earlier this winter the price of wheat on the Kansas City Board of Trade hit an all time high of thirteen dollars. The margin call per contract was $30,000.00 per contract. That is money that farmers or their elevators had to come up with to stay liquid with the Kansas City Board Of Trade. I'm talking about millions and millions of dollars. Some smaller co-ops and elevators went broke because of it. At the present time, the price of wheat looks good for this summer, but a record harvest will put pressure on the price to drop. Would you also believe that this high wheat market is all weather related and NOT White House related?



Now for cattle, don't blame cattlemen for high food prices! Currently the fed cattle price is at a three-year low. Yes, beef prices at the farm are at a three-year low! Live cattle traded last week for about $86.00 per hundredweight. That's about $15.00 lower than one year ago! It's not us cowboys' fault nor is it the fault of hog or chicken boys. Hog prices are at a three-year low as well. Don't ask me about fowl, I don't have a clue.



The price of energy is a main driver in the high price of food by way of freight and demand. Energy is competing for corn and soybeans as well as the food sector. Plus factor in the cheap dollar on a global scale, and exports are up which is an increase in demand. Believe me folks, don't blame farmers for high food prices because we as farmers will fill the demand with the safest, most abundant food supply if all the well-fed, enviro-idiots and bureaucrats will just get out of our way. Oh yeah, we might just supply some of the energy demand while we're at it. You want cheaper food and a better economy? Tell congress to quit blaming American owned oil and gas companies and let them (big and small) drill on the 390 million acres the Federal Government owns! Believe me, it hurt to say that, but common sense tells us the best fix for high prices is high prices!



I'm Monte Tucker, and that is what's under my highly un-subsidized hat.



Monte Tucker is an Oklahoma farmer/rancher who provides his opinions to a couple local newspapers, often writing about national agricultural issues.