Wonder why prices of agricultural commodities remain stubbornly lofty despite advances in technology?
Not all have been about "demand" growth from emerging markets.
The widely unseen forces come from central bank money printing, trade restrictions and agricultural subsidies. For instance the US government subsidizes farm owners not to farm (which contributes to a reduction in supplies).
From Wall Street Journal Blog (bold highlights original)
Bottom line: politics distorts demand and supply.More farmers than expected applied to put their land in a government program that pays the farmers not to plant crops and not all of the acres could be accommodated, the U.S. Department of Agriculture said Friday.
The USDA accepted 3.9 million new acres into the Conservation Reserve Program, or CRP, in the latest sign-up period and turned away 600,000 acres.
Interest in the program was so high, a USDA spokesman said, the agency extended the time period to allow farmers to get their applications filed.
A guaranteed return on land is appealing to farmers, especially if the land isn’t well suited for planting crops, said Todd Davis, a senior economist with the American Farm Bureau Federation.
The USDA is anxious to enroll new acres in the program that is aimed at protecting environmentally sensitive land because on Sept. 30 the contracts that keep about 6.5 million acres of potential farm land idle will expire. Contracts take land out of production, thus conserving soil, for either 10 or 15 years.
About 30 million acres are now idled under the program, but the 6.5-million-acre exodus will be the largest ever. The USDA spends about $1.8 billion a year on the program, paying “rent” to land owners.
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