Looking for Economic Stability: Lessons Learned From 2008


We’ve seen some buoyant movement in the grain markets over the last couple of weeks.  I’m sure some of you are welcoming that as a last minute Christmas present as you digest your last vestige of Christmas pudding.  In many ways Christmas puts an exclamation mark on many a crop farmers year.  This year there might still be corn out in Ontario.  However, for most of us, the eventful year, which was 2008, is surely winding down.

So much has happened this year.  If I could point out four big events that shaped our time this past year, I’d point to the peak in crop prices in June and July, the cataclysmic destruction in credit markets causing world wide global turmoil in both stocks and commodities, the election of Barack Obama and the subsequent election of Stephen Harper followed by his whisker escape from almost certain defeat.  There were other things in 2008, big things, but the year was so full, I think those four things have affected us most and will continue to impact us into 2009.

I watch a popular program on the Internet from Iowa Public Television called Market to Market.  I watch it because its one of the best looks at American agriculture and DTN’s Darin Newson and Elaine Kub are often featured.  The market segment changes from week to week with analysts from across American farm country.  The host Mark Pearson always goes back and forth with these analysts asking the proverbial question, “Is it time to makes sales?”  However, late last June, he added another phrase to his question.  Just before he asked the question, he added, aren’t these prices Disneyland!  I’ve been in this industry for a few decades and I’ve never seen anything like this.  It’s pricing Disneyland.  And then he asked, “Is it times to makes sales?”

To me it was a seminal moment in the 2008 marketing year.  Of course it took place at one of the highest points in the market last June.  Since then I’ve thought about it a hundred times.  When you’ve got corn pushing $8/bushel, it truly is pricing Disneyland and just because you’ve been there before doesn’t mean you should watch the parade going by.  Of course at the time many of us were wondering about basis and why it as so low.  When you are in unprecedented futures pricing moments, basis always goes its own way.  However, when its pricing Disneyland in farm country the euphoria clearly clouded everybody’s view.  However, what happened next nobody saw.

I had written extensively about the sub-prime mortgage problem for several months at the time.  It never did quite added up but while pricing Disneyland was going on, it’s impact on farm country seemed so distant.  However, it didn’t take long.  Over a period of a couple months banks and credit started drying up in the United States.  The non-commercial interests in the grain market started to exit, grabbing hold of the tangibility of grain to sell for cash.  It started slowly but when Bear Stearns went down followed later by Lehman Brothers, Merrill Lynch and AIG, the selling turned into a torrent.  Rumour, innuendo and a certain amount of “panic” made things worse.  Clearly, a global economic contraction was foisted upon everybody.  Oil went from $147 in July to about $35 today.  The ethanol complex teetered.   The grains got caught in the once in 70 year financial Tsunami.  Nobody could have predicted it.

Can we recover?  Yes, we can!  If there are three words which will bring this thing back in January it is those.  Yes we can!  Barack Obama soared to the US Presidency in 2008 and I mean soared.  He beat Hillary Clinton who I had picked for President, essentially out-foxing her politically for the Democratic nomination and then transforming racial divisions to beat John McCain.  It was an election that changed the United States forever and it also has the potential to give this global economy something, which isn’t tangibly evident.  Barack Obama when he becomes President offers hope and confidence to a world hungry for it.  I expect that alone to have a huge impact on our marketing and financial world.  Yes we can.

In 2008 Stephen Harper didn’t think ordinary folks cared about rich people enjoying their artistic galas at taxpayers expense.  He might have been right, but in Quebec it was turned on its head as an attack on the Quebec nation.  He lost his chance for a majority there.  Six weeks later he decided to cut off the opposition parties lifeline by the elimination of political subsidies.  That almost and may still cost him his career as so far he’s only been bailed out by the Governor General.  This on going soap opera grips Canadian farm country still.

So now we’re talking about a $30 billion Canadian federal deficit, an American economy staggered by a credit market gone, and commodity markets in spite of recent gains, still wondering if we’ve hit bottom.  Looking ahead based on what’s happened in 2008, isn’t predicting for 2009 a fool’s game?  I dunno, so maybe coalition leader Prime Minister Ignatieff, Jack Layton as Agriculture minister, $6 corn and $15 soybeans and 15% interest rates might be in the mix for this time next year.  As I said, I dunno.  Let’s just hope for some stability and look back on 2008 as many lessons learned.