I have a saying, “Let’s put that in the rear view mirror.”  It works for me.  When my farmer colleagues lament about prices missed, I tell them to put all of that in the rear view mirror.  Looking back is nice but it much more important to look ahead.  As we move into 2009, let’s put our lessons learned in our memory bank and put everything else in the proverbial rearview mirror.

I’ve got an even better example.  Coming this winter your loyal scribe will find himself in the city streets of Dhaka, Bangladesh.  I’ve been invited to speak at United International University in Dhaka on the vagaries of global agricultural markets.  Dhaka is a big Asian city with drivers right out of a video game.  It’s chaos and when I ride through those streets I feel like I’m shot out of a cannon.

I’m with my partner in crime, Dr. A.K. Enamul Haque who is an economics professor at UIU.  When he lived in Canada he drove a rickety old Chevette, which I had given him strict orders not to drive over 80 kilometres/hr.  He did that diligently, driving around southern Ontario like he was a grandma.  However, when I first got to Bangladesh in 1993, he drove like he was Jeff Gordon of NASCAR.  He was in and out of traffic like Alan Iverson is on the basketball court.  So I asked him about it.  I said what rule do you use on these roads?  He looked at me and said, “I DON”T LOOK BACK!”

So as we look ahead, let’s drive that car like my friend Enamul into 2009.  In many ways as we look ahead, that fading vision of 2008 we see in the rear view mirror will certainly continue to manifest itself in 2009.  The key as I see it for Canadian agricultural producers to look at 2009 as the great adjustment.  We might think the global economic contraction started to happen last September, but the economic numbers say it actually started much earlier than that.  So looking ahead, I think the challenge will lie in working through a year where economic growth numbers will probably continue to be negative.  It will manifest itself in North America, but it will also manifest itself in places like China where economic growth has been shaved by at least 3 points from their 2008 levels.  With China importing soybeans hand over foot, we can only imagine what “could have been” if its growth had not been impacted like it has.  Sure, the Chinese like to eat as much as we do.  However, with aggregate global demand for consumer goods decreasing, their factory work is slowing, their incomes are not rising as quickly and the whole China paradigm, at least temporarily in 2009 is set to slow down.

Simply put, agricultural demand will continue to be impacted in 2009 because of the global economic contraction.  Some of you might doubt that based on the market action of the last few weeks where the grains have sloughed off some of oil’s bearishness and found a little bit of blue skies.  I can’t argue that’s temporary because nobody knows.  However, what I would say is our grain marketing future is always better with worldwide economic vibrancy versus global economic recession.  As we look ahead toward October, November, and December of 2009, I’m hoping we see signs that the worst of this economic contraction is over.

Of course in the short term there will be challenges.  Remember when I said a few months ago about $5 corn being the new $2.50?  That was before we saw corn retreat below $5, with many people believing that couldn’t happen anymore.  Needless to say the challenge is to produce corn in Ontario, Quebec and Manitoba profitably.  With costs haven risen, the reality in January 2009, that’s still a stretch.  So price will have to move up or costs move down so that can happen.

Looking ahead, there should be a lot of creaking, tweaking and teetering.  The creaking and tweaking I’m referring to is that “cost price squeeze I intimated about earlier.  The teetering refers to ethanol and everything it represents.  I hope that the Ontario ethanol sector is stronger a year from now than it is today.  In many ways I have more hope for the Ontario sector than I do our American friends to the south.  With Verasun going bankrupt and other plants doing the same or just “slow burning” the dreaded ethanol rationalization has come.  Expansion of the American ethanol sector seems a non-starter.  However, some hope might come from Barack Obama and an American congress.  If ethanol boosters can change the ethanol blends from E-10 (10% ethanol blend with gas) to E-12 (12% blend with gas) or even better get the big three to produce more E-85 cars, ethanol demand destruction might turn around.

Of course the big factor in 2009 will be growing season weather.  Looking ahead at some point the US is going to produce a record corn average yield over 160 bushels/acre.  Ontario will likely follow.  Of course what happens if it goes the other way, the US at 130 with Ontario the same.

You see we’re all smart guys now.  However, it’s those unexpected things, which happen on ordinary Tuesdays that sometimes change things forever.  Agricultural markets included.  The key of course is just like me on those Asian expressways.  Don’t look back.  Keep looking ahead.