As food prices spiral, farmers, others profit

updated 11:38 a.m. ET May 27, 2008

WILLMAR, Minn. - The steepest run-ups in food prices since 1990 are hurting grocery shoppers, restaurants and school cafeterias but they're making others rich.

The winners in the new food economy include crop farmers selling corn and wheat for near-record highs after years of crushingly low prices. Ingredient makers like Cargill and ADM are rife with profits. Fertilizer and tractor companies are cashing in. Hedge funds who made big bets on rising wheat, soy and corn were spectacularly correct. Oil and gas companies, too — it takes natural gas to cook those Wheaties and diesel to haul them around the country.

Travel along the nation's food chain and you'll find some of the biggest profits closest to the land. The nation's farmers, who raise everything from cows to cucumbers, saw their average household income climb about 7 percent last year to more than $83,000. But in grain-rich states, the results were dramatically higher. In Minnesota alone, the median income for crop farmers soared 80 percent to $95,000.

That brings us to Chad Willis.

Willis raises corn and soy beans on 550 acres near Willmar, some of the nation's best corn-growing country.

He sells his grain nine miles up the road from an ethanol plant he invested in. His family cars are powered by an 85 percent blend of the corn-based fuel. His black and gold-trimmed cap reads "E85 Everywhere." And he knows that grocery shoppers jolted by higher prices for cereal or eggs or chicken think it's because of ethanol, which consumed 20 percent of last year's corn crop.

Willis isn't saying how much he made last year. While he acknowledges these are good times to be a farmer, he says he's not pulling in as much as the median income for crop farmers.

Excited, yes, but cautious
"Most people are excited, yes, but cautious about when things are going to turn around, and how hard it's going to turn around," he said.

In between Willis' farm and town, the owners of Haug Implement are having some of the best times anyone can remember. The Deere & Co. dealer sells farm tractors that can run to $160,000 or more and combines that can cost $300,000, a major investment even in the best of times.

Normally Haug would still be taking orders for combines for delivery for the fall harvest. But Deere cut off new orders in mid-November because demand was so high.

Owner Donald Haug Jr. says it wasn't long ago that he couldn't close on new equipment unless he narrowed the gap between trade-in and the sale price to $10,000.

"We're seeing some substantial purchasing, and we're talking over $100,000, and the guy just strokes the check for it," he said.

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