The World in 2100: Ten Billion People, No Oil and Nov 7, 2011 23:26:16 GMT
Post by curiousgeorge on Nov 7, 2011 23:26:16 GMT
Since most fertilizer is petroleum based I think the 500 pound gorilla hiding in the closet is increasing fuel prices.
Perhaps sigurdur can shed some light on the link you provided. I am always skeptical of counting other peoples money because there is a tendency to look through rose colored glasses and count all the profits without seeing all the costs.
That's easy to understand. The commodity speculators buy and sell futures contracts based on things like the weather and projected yields. Farmers are the beneficiaries of high prices driven by short supply and high demand. Especially if it's unexpected. They also carry crop insurance if their crop fails due to weather, insects, etc. Crop insurance may or may not cover the entire loss, but usually will cover 75% or more. And there are Federal funds also available in many cases.
The worst scenario for a farmer is to have a bumper crop with low demand. If they can't sell it for a profit, they have to eat the difference between contract price and input costs. That can put a farm out of business in a couple years, which is why the feds prop up agriculture. Political leaders recognize that people need to eat, and if a lot of farms go under, folks get real hungry and start causing all kinds of havoc - up to and including revolutions with real guns.
A complicating factor is that commodities are traded globally. So a bad year in the US is very often a really good year in Brazil for example. And vice versa. Keep in mind that a "good" year for a farmer is high demand and low supply on a global basis.