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The unthinkable, the unforeseen, and the unmentionable
Hoosier Ag Today
By Gary Truitt
This time of year the press is filled with predictions about the year ahead. Some are educated guesses, some are simply speculations, and some are just hot air. All, however, are based on where we have been, the events and trends of the past year or years. While cleaning up my office over the holidays, I came across a box containing columns I have written over the past five years. Paging through the topics I covered painted a picture of the developments we saw in 2006.

There were plenty of articles on ethanol, its promise and potential to increase corn demand. Then, as now, there were plenty of critics who said it would never amount to anything. Last week corn traded above $4 at the Chicago Board of Trade due primarily to increased demand for ethanol. While the ethanol and corn industries like to take credit for this, and while some credit is certainly due, the main reason ethanol became front page news in 2006 was the price of oil.

When crude oil prices went above $60 a barrel and retail gasoline prices shot above $3 a gallon, political leaders and consumers woke up to the fact we had a problem. As long as oil prices remain high and the leaders of oil rich nations continue to top the U.S. Most Wanted list, ethanol will remain the centerpiece of U.S. energy policy.

But expect some changes in ethanol policy in 2007. The current federal subsidy for ethanol will likely see some adjustment. Livestock leaders and feeders are calling for a moratorium on the subsidy that has made building ethanol plants extremely profitable. While such a drastic action is unlikely, a graduated subsidy is being considered by Senator Lugar and may well make an appearance in Washington in 2007. This would tie the level of federal subsidy to the price of oil. When oil prices are high, the subsidy is low.

When - or if - oil prices fall, the subsidy would be reduced. This would give the ethanol industry the support it needs to grow without providing incentives to over expand.

Food safety was another issue that came up a lot in past columns, and it came up a lot in 2006. Major food recalls made headlines several times in 2006 and I expect this will continue in 2007.

It is not that our food is any less safe, it is just that we are getting better at detecting food safety problems and getting better at reporting them. Food companies would rather risk the expense and bad publicity of a food recall than take the chance of being sued later. The media, always on the hunt for a good scare story, has found that food scares make good copy. Expect more food scares in 2007.

Congress will write a new Farm Bill in 2007; and it will be different than current policy - but not radically so. Changes in U.S. farm policy are evolutionary not revolutionary. I am hopeful that the new bill will be more inclusive of other sectors of agriculture and will provide programs and resources for smaller diversified farming operations. A far more intense debate will occur over trade. Trade promotion Authority (TPA) will be up for renewal in 2007, and it will be much harder to get this passed with a Democratic majority.

The markets will remain extremely volatile in the coming year. With tight corn supplies and declining soybean acreage, prices will reason to any weather scares or production problems. With the right set of circumstances, corn could go to $5 a bushel. Let soybean rust blow into the Midwest, and soybean prices could be well over $8.

Livestock prices will also increase in the New Year as higher feed costs cause reductions in inventory. There will be lots of news stories on how this will lead to higher food prices but actual increases to consumers will be minimal.

Finally, one consumer trend I am sure will occur. Men will become much more interested in cooking in 2007. In fact, some will actually kick their wives out of the kitchen and insist on making homemade meals. This is because Hooters has published a cookbook. The restaurant chain, known more for buxom waitresses in skimpy outfits than culinary standards, has published a 144-page book of recipes. It includes such delicacies as drunken chicken and an entire section on hot wings. No word on if it has photos of Hooters personnel, but it does contain sports trivia.

This farm news was published in the Jan. 3, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.

1/3/2007