Traveling along interstates in the Midwest, sooner or later you will see a big orange sign that says “Construction Zone Ahead.” What these signs should say is “prepare to be late for wherever it is you are going.” Road work inevitably leads to traffic slowdowns or seemingly endless detours. Chances are that you will find yourself traveling along between two cement barriers with a large truck riding on your bumper. The big orange signs are meant to warn us that our trip is about to get more perilous. As we begin traveling down the road of 2012, let me put up a few road signs of dangers that may lay ahead.
•Caution Uneven Pavement - The ethanol and biodiesel energy sectors begin 2012 with some new policies in place. The biodiesel tax credit is back for 2012, while the ethanol subsidy is gone. Ethanol industry insiders say the industry will do just fine without the subsidy. They are also confident that this will be the year E15 will become a reality in the marketplace. Caution is needed here because, in an election year, ethanol will become a political issue and anything can happen. In addition, big oil still has a monopoly on the fuel market and a short leash on auto manufacturers. Renewable fuels are still not playing on a level surface, and the other side has much deeper pockets.
•Detour Ahead - The writing of the farm bill has already taken one detour and may take a few more. While hearings continue on policy options, the real decision on farm policy will be made by those who hold the purse strings. In addition, several large potholes threaten to derail farm policy. Direct payments for cotton, sugar, and other crops are on the chopping block. The CRP program may also be hard to keep as the market clamors for more productive acreage to be put back in production. The real warning here is that those who will have the biggest impact on the farm bill are outside of agriculture.
•Bump - A big bump happened in 2011 and will carry over into the new year. The bump came in the form of an economic meltdown in Europe. While much has been made of the agreements reached by European leaders, the reality is the debt is still there and there is no plan to deal with it. This situation will continue to have an impact on U.S. equity and commodity markets in the year ahead.
•Curve Ahead - One thing that could turn U.S. agriculture on its ear is a major shift in the currently and economy of China. Not only is this the largest economy is the world, it is a major market for U.S. agriculture. Chinese leaders are walking a thin line as they try and keep their economy growing while keeping inflation under control. The U.S. is pressuring them to adjust the value of their currency, but too big an adjustment would send economic shockwaves around the world.
•Lane Restrictions - One of the big issues in agriculture in 2011 was the number and type of regulations coming out of Washington. This trend is likely to continue in 2012 with possible labor safety law changes for children on the farm, continued reviews of crop protection chemicals, and a variety of other proposed regulations.
•Bridge Out - One of the biggest consumer issues in 2012 is going to be food prices. It is forecast that beef prices will hit record high levels. This will cause consumers, who have no idea why the prices are high, to demand something be done.
The media will cast blame at ethanol, government subsidies, and greedy big agribusinesses.
It is unlikely we will be able to avoid any of these road hazards, but knowing what is coming can help make the trip through 2012 a little more pleasant.
The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Gary Truitt may write to him in care of this publication.
