Farmers remain hopeful even as 08 profits erode

By Karl Plume

CHICAGO (Reuters) - Iowa farmer Gordon Wassenaar says he is optimistic about 2009, displaying a sometimes puzzling "glass half full" mentality needed in a profession in which mother nature can wipe out months of work overnight.

He and other U.S. farmers notched record profits in 2008 as crop prices soared to all-time peaks, but economists say they may be lucky to break even this year because grain prices have plunged 50 percent while farm costs remain high.

"We're cautiously optimistic, but nobody thinks that prices are going to go anywhere near as high as they were in 2008," he said from his 1,500 acre farm in Prairie City, Iowa, where he grows corn and soybeans.

"Realistically, unless you have an exceptionally good crop, you're going to have to have (corn) prices over $4 a bushel to make any money at all. For soybeans, we probably need somewhere between $8 and $9 a bushel, but we're in an area where we normally get pretty good soybean yields," Wassenaar said.

Currently, corn futures prices are near $4 a bushel, an historically high price for corn but still down 50 percent from the record high of $7.65 a bushel posted last summer.

Soybeans are around $9.80 a bushel, down 41 percent from last summer's all-time peak of $16.63 a bushel.

Scorching demand for grains and oilseeds from livestock and poultry producers, exporters and the rapidly expanding biofuels industry helped drive the historic bull run in 2008.

An influx of investment fund money into grains and other commodities further fueled the advance to record highs.

But markets turned sour by the fall as the housing market bubble burst, credit markets seized up and financial markets dived, sending investors fleeing the traditionally volatile commodities markets for safer havens.

Now, with a deep and prolonged global recession ahead, there is concern about demand for agricultural products.

"Farmers are certainly nervous about where the general economy is going. The umbrella that's making everybody a little nervous is how deep the recession will be and how long will it last," said University of Illinois agricultural economist Darrel Good.

DEMAND QUESTIONS

The export market is a concern as the global recession drags on. Domestic demand for feed grains is also off.

Producers of beef and dairy cattle producers and hogs reduced herds in response to the summer's soaring feed grain costs, while poultry producers scaled back flocks.

Pilgrim's Pride Corp, the largest U.S. chicken producer, filed for bankruptcy protection in December, citing high feed costs and low meat prices.