Economist foresees continued volatility in grain prices
Updated: Thursday, December 20, 2012 12:29 PM
Growing foreign incomes, value of U.S. dollar are issues
By MATTHEW WEAVER
An economist says he expects large price swings for wheat to continue for the next seven or eight years.
Higher prices come with more price volatility, said Randy Fortenbery, Washington State University economic sciences professor and small grains endowed chair.
The value of the U.S. dollar will continue to be important over the next decade, Fortenbery said. It's expected to continue to drop in relative value to other currencies through 2020, which will bolster U.S. commodity prices, he said. When the dollar's value is lower relative to their currency, buyers in developing countries have more purchasing power.
Incomes will grow significantly in those countries, opening the door for large exporters who are competitive in the international market, Fortenbery said.
"If we're going to continue to be exporters, what really matters is 'What price can our customers pay?'" he said.
Fortenbery said farmers should listen to price forecasts of pundits -- and then ignore them to a certain extent.
"When prices are going up, most analysts will forecast higher prices. When prices are going down, most of them will forecast lower prices," he said.
Fortenbery advised growers to control their emotions while in a volatile market.
"The easiest way to do that is to take a reasonable price for at least some part of your production early, so you don't have to worry about what happens later," he said.
Once they sell, farmers need to stop watching what the price does, he said.
"You have to fight against talking about how much you lost because you sold for a profit," Fortenbery said.
Fortenbery spoke at the agri-business luncheon at the Tri-State Grain Growers Convention in Coeur d'Alene, Idaho.