As food prices spiral, farmers, others profit

The boom times in farm country have arrived. Corn, soybean, and wheat prices have been pushed at or near record highs by a combination of high demand and new money from hedge fund traders who used to show little interest in those markets. Over the past 20 years, Minneapolis Grain Exchange trading volume has risen almost six-fold to a new record last year. The run-up is because in the frenzied trading the same commodities are changing hands far more than they used to.

"Grain farmers are making a hell of a lot of money," said Peter Georgantones, president of Investment Trading Services, a commodities brokerage in Bloomington, Minn. "I got grain farmers — a ton of them — who are going to improve their net worth this year — net, now — by a half a million bucks minimum. For one year. That's a nice gain. Not to mention their land's worth more."

Newspapers cover much of the floor in his office and 22 yellow Post-it notes cover much of his desk, where one computer terminal shows nothing but commodity prices. Every few minutes his phone rings with a call from a farmer checking crop prices.

"These guys, they grow 60, 70, 80 thousand bushels of beans," he said. "I got guys sitting on $2, $3 million worth of grain right now. Farmers are making good money."

Biofuels debate
The International Monetary Fund estimates biofuels accounted for almost half the increase in consumption of major food crops in 2006-2007, saying it has propelled prices for corn, other grains, meat, poultry and dairy.

Others dispute that. A report last month from the Agricultural and Food Policy Center at Texas A&M University said higher corn prices have had little to do with rising food costs because other factors, such as rising energy costs, have been at least as important.

Willis, the farmer near Willmar, is quick to point out that farmers pay much of those profits right back out to their own suppliers.

The liquid propane that runs his corn drier cost $1.55 per gallon last year. He's been told to expect $2 this year. Fertilizer last year ran $115 per acre. This spring it cost double that. He bought 2,500 gallons of diesel fuel for his tractors last year, at a price that started at $2.50 a gallon and rose to $3.09 by the end of the year and has risen further since then.

"You look at the grain prices, yeah, that's nice," he said. "But everything's going up right along with it."

Bottom-line boosters
While virtually all businesses are contending with higher energy costs, the rising commodities prices are proving to be bottom-line boosters for other sectors, too.

Profits at seed and pesticide maker Monsanto Inc. reached nearly $1 billion last year — a 14-fold increase since 2003. They've tripled to $1.1 billion at agrichemical maker Syngenta and agriculture divisions of DuPont Co. and Dow Chemical Co. have also seen their earnings balloon.

Cargill, which makes ingredients and trades in commodities markets, boosted its profits to $2.3 billion, up nearly six-fold since 2001.

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