“What goes up will always come down.”
Not that we haven’t previously commented about the subject, it is noteworthy again as agriculture experiences the “best markets” ever.
Grain prices remain well above long-term averages, not far below record levels, and cattle prices, certainly those paid for lightweights, are at all-time dollars.
Skyrocket amounts continue being dispersed for farm ground with the optimism of returns well above bank deposit dividends. Even more extreme, in relation to possible revenue in pounds of beef produced, is grassland price expansion; sometimes with the intent to plow up and grow grain.
Biggest problem is all agriculture inputs are at near record costs, too, as is repeated in our daily conversions.
Thus, farm-ranch profits are often below when commodity prices were considerably lower.
The worst but true fact, not believed by those who’ve never experienced it, and forgotten by many who have, “the prices received for commodities will deteriorate from where they are today.”
Yet, expenses will stay proportionately high, we predict. “Gasoline and fertilizer have gone down,” somebody insisted. Fact, but they’re still above averages, and not far from peaks.
Lower commodity prices, coupled with continuing high inputs, would reduce farm income, especially pressuring those who’ve come to depend on today’s values, some even leveraging operations based on them.
An emphatic proclamation: “They’re not making any more land.” That’s true, yet land appraises deteriorated as much as 400 percent three decades ago.
Others argue, “Commodity prices might go down, but they will remain profitable.”
Again those previously with that contention have been forced out of the industry when they in reality were not.
“Interest rates were four times or more higher than they are now,” comes the argument. Again, that’s accurate.
Whatever happens, today’s commodity prices will come down. When and how much is yet to be determined, but profitability is going to be become more difficult.
Reminds us of Ecclesiastes 1:3: “The sun comes up, and the sun goes down, then does it again and again.” Also, First Corinthians 15:44: “It comes up powerful, and goes down in mortality.”
Many appreciate Second Kings 6:25: “Grain prices soared astronomically,” but soon forget Second Kings 7:16: “Grain prices dropped overnight.” Most notable, First Corinthians 10:15: “The lesson we must learn is at all costs to avoid worshipping a false god.”