- The Washington Times - Wednesday, May 28, 2008

WILLMAR, Minn.

he steepest run-ups in food prices since 1990 are hurting grocery shoppers, restaurants and school cafeterias, but they’re making others rich.

The winners in the new food economy include farmers selling corn and wheat for near-record highs after years of crushingly low prices. Ingredient makers like Cargill and ADM are rife with profits. Fertilizer and tractor companies are cashing in. Hedge funds who made big bets on rising wheat, soy and corn were spectacularly correct. Oil and gas companies, too - it takes natural gas to cook those Wheaties and diesel to haul them across the country.

Travel along the nation’s food chain, and you’ll find some of the biggest profits closest to the land. The nation’s farmers, who raise everything from cows to cucumbers, saw their average household income climb about 7 percent last year to more than $83,000. But in grain-rich states, the results were dramatically higher. In Minnesota alone, the median income for crop farmers soared 80 percent to $95,000.

And then there is Chad Willis.

Mr. Willis raises corn and soy beans on 550 acres near Willmar, some of the nation’s best corn-growing country.

He sells his grain nine miles up the road from an ethanol plant he invested in. His family cars are powered by an 85 percent blend of the corn-based fuel. His black and gold-trimmed cap reads “E85 Everywhere.” And he knows that grocery shoppers jolted by higher prices for cereal or eggs or chicken think the increase is because of ethanol, which consumed 20 percent of last year’s corn crop.

Mr. Willis isn’t saying how much he made last year. Although he acknowledges that these are good times to be a farmer, he says he’s not pulling in as much as the median income for crop farmers.

“Most people are excited, yes, but cautious about when things are going to turn around, and how hard it’s going to turn around,” he said.

In between Mr. Willis’ farm and town, the owners of Haug Implement are having some of the best times anyone can remember. The Deere & Co. dealer sells tractors that can run to $160,000 or more and combines that can cost $300,000, a major investment even in the best of times.

Normally, Haug would still be taking orders for combines for delivery for the fall harvest. But Deere cut off new orders in mid-November because demand was too high.

Owner Donald Haug Jr. says it wasn’t long ago that he couldn’t close on new equipment unless he narrowed the gap between trade-in and the sale price to $10,000.

“We’re seeing some substantial purchasing, and we’re talking over $100,000, and the guy just strokes the check for it,” he said.

Boom times in farm country have arrived. Corn, soybean and wheat prices have been pushed at or near record highs by a combination of high demand and new money from hedge fund traders who used to show little interest in those markets. In the past 20 years, Minneapolis Grain Exchange trading volume has risen almost sixfold to a record last year. The run-up is because, in the frenzied trading, the same commodities are changing hands far more than they used to.

“Grain farmers are making a … lot of money,” said Peter Georgantones, president of Investment Trading Services, a commodities brokerage in Bloomington, Minn. “I got grain farmers - a ton of them - who are going to improve their net worth this year - net, now - by a half a million bucks minimum. For one year. That’s a nice gain. Not to mention their land’s worth more.”

The International Monetary Fund estimates that biofuels accounted for almost half the increase in consumption of major food crops in 2006-2007, saying it has propelled prices for corn, other grains, meat, poultry and dairy.

Others dispute that. A report last month from the Agricultural and Food Policy Center at Texas A&M; University said higher corn prices have had little to do with rising food costs because other factors, such as rising energy costs, have been at least as important.

Although virtually all businesses are contending with higher energy costs, the rising commodities prices are proving to be bottom-line boosters for other sectors, too.

Profits at seed and pesticide maker Monsanto Inc. reached nearly $1 billion last year - a 14-fold increase since 2003. They’ve tripled to $1.1 billion at agrichemical maker Syngenta, and agriculture divisions of DuPont Co. and Dow Chemical Co. have also seen their earnings balloon.

Cargill, which makes ingredi[Jnts and trades in commodities markets, boosted its profits to $2.3 billion, up nearly sixfold since 2001.

Meanwhile, profits at agricultural processor Archer Daniels Midland Co. have more than quadrupled to $2.16 billion during the same period.

Fertilizer makers are winning big, too.

Mosaic Co. saw its third-quarter profits jump 10-fold to $520.8 million because strong demand from farmers is giving it power to raise prices.

Companies like Deere, the world’s biggest maker of farm machinery, are in the midst of flush times, too.

From 2005 to 2007, Deere’s net profit rose more than 25 percent to $1.8 billion. Meanwhile, operating profits of the Moline, Ill.-based company’s agriculture division rose nearly 50 percent, to $1.4 billion.

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