During the last three years, agriculture has had a major boom in every sector from grain and livestock to ethanol production to niche markets. Now, America is faced with possibly one of the worst economic crises we have seen since the Great Depression.

On Friday, Oct. 10, the Dow closed below 8,000 points, which is its lowest point in a three-decade period. Dermot Hayes, an ag-economist said, “The sell-off on Wall Street created overselling on the Chicago Board of Trade because they needed the money on Wall Street.”

On Monday, the Dow opened up 400 points stronger, and closed up over 900 points, but that doesn’t mean we are out of this economic downtrend. The commodity prices also saw a small uptrend on Monday that was triggered by a strong financial sector.

During the flood over the summer, we saw grain prices run-up to levels that had never been seen in our history, and the inputs followed the grain run-ups thinking the price would stay up there. As summer progressed, the United States Department of Agriculture felt crop conditions were improving.

Along with the slippery slope in the economy, commodity prices fell as fast as they climbed up. Steve Johnson, ISU Extension economist said, “In 2009 crop inputs are going to be up 25 to 30 percent, and while the increasing value of the dollar should decrease phosphorus and potassium imports, it’s not likely to happen quick enough to help with spring fertilizer costs, and as a response to the higher 2009 input costs, I expect growers will cut back on phosphorus and potassium rates.”

Farm operations now have to be run more efficiently, and their risks need to be managed more than ever in these volatile markets. Farm operations need to do everything they can to manage their input cost, such as using risk management tools that are available through the Iowa State University Extension service, forward contracting what they feel is the appropriate number of bushels to insure a profit, locking in the input cost. Johnson said, “I think this fall’s $900 to $975 per ton anhydrous ammonia price will be less than next spring’s costs. Since natural gas is the primary ingredient, this winter’s competition for supplies will be high. Suppliers will likely continue to require ‘prepay for spring’ to guarantee adequate supply and maintain their adequate profit margin.”

Hayes figured that medium quality land is valued at $4000 per acre and good land is worth $5000 per acre. Hayes said, at the current corn price of $4.06 to $4.12, and with approximately a 25 cent spread on cash corn, land is overpriced by roughly 5 percent, but if we saw 4.60 per bushel on the Board of Trade with a 25 cent spread, the land price is justifiable, and, Johnson says, “Iowa land values will likely increase an additional 10 percent to 15 percent for 2008 and be reflected in higher cash rents in 2009 by roughly this same percentage increase.”

Although the New York Stock Exchange and the Chicago Board of Trade got off to a strong start this week during Columbus Day, the Dow managed to close down on Tuesday and Wednesday, and the effects have continued to rip through to commodity markets also. Hayes did say, “Commodity prices have fallen because oil prices have fallen, and if OPEC cuts oil production we will see a rise in commodity prices.”

If we do not see a rebound on Wall Street in hopes that the bail-out will take effect it will be a long year for investors, consumers, and in Iowa’s case, the agricultural markets.

— Chet Hollingshead is a sophomore in agricultural studies from Ogden