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’09 ag show in Fort Dodge

By Staff | Dec 4, 2009

David Kruse, president of CommStock Investments Inc., of Royal, was the first of five presenters at this week's Farm News Ag Show. He spoke on reinflating the American economy.

It was standing room only Wednesday morning as over 100 ag producers and businessmen listened to market analyst David Kruse talk about the influence on ag marketing as the economy is reinflated.

Kruse was the first of five speakers scheduled to make presentations Wednesday and Thursday during the 2009 Farm News Ag Show in the Career Development Building on the Iowa Central Community College campus.

In looking over a demographic of how unemployment has grown over the past year, Kruse noted “that the best place to be is in the Plains States.

“We farmers are fortunate,” he said. “at least we are still employed next (growing) season.”

Recovery to take a while

He said the trail to economic recovery will be a long long to walk and there will repercussions on ag marketing in the process.

He said the recession, and the strengthening dollar, are causing a reduction in demand for almost all U.S. ag products, with th exception of China, which is purchasing 37.82 percent of the soybeans the U.S. exports this year.

“China was purchasing our soybeans before we grew them,” Kruse said. “I guess we can be giddy and happy that they are buying our beans, or we can wonder ‘What would happen if they stop buying our beans.'”

He said the severe 2008 drought in South America cut the top of yield production off soybeans, which aided in China buying so many U.S. beans.

“But I expect that South America’s production will rebound and China will buy some soybeans from them.”

On another note on China, Kruse said he thinks people put too much trust in that the Chinese consumer will buy more U.S. goods and help revitalize the economy in this nation; at least in the short term.

“Right now, American consumers spends about 78 percent of their incomes and save very little,” Kruse said. In China, he added, households spend less than 1 percent of their incomes on non-essential living; but rather saves a larger portion of its income.

Kruse advised that as the demand for Iowa grain and other farm products drops, the profitable manager will buy crop inputs later to take advantage of falling prices, and sell their grain and grow it later.

He said in times of market bottoms, he sells 100 percent of his harvest. When the market is rising, he added, “I’m happy to leave it in the bin and gain in value.”

Ethanol’s impact

Kruse said that ethanol investments are still “a perfect hedge for corn marketing.” He said if the market is low, ethanol plants will be profitable and issue dividends.

“But when the price is high, ethanol plants will not be issuing dividend checks, but we won’t need it, because the (corn) price is high.”

He said ethanol has been a tremendous boon for corn producers and gasoline users.

“Ethanol has actually kept gas prices down,” Kruse said. From 1987 to 2007 he said that the U.S. corn harvest increased by 41 percent.

“Without ethanol,” Kruse said, “we’d be buried in corn and it would be very cheap.”

He also cast doubt on the nation reaching the federally mandated U.S. production of ethanol to 15 billion gallons by the year 2015, unless the government raises the blending cap to higher than 10 percent.

“Brazil blends upward to 20 percent. “They’ve done this for years, and they do alright.”

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