How is your bubble doing? The media sees crop prices and farmland prices rise sharply and writes bubble article after bubble article on the prospects of the ag economy deflating.

All are sure that grain prices cannot stay high and that farmland values will pop and implode. So many seem to believe that, that I have come to believe that they must be wrong and something else will happen.

Yes, commodity and farmland prices are seeing sharp gains but, in part, it is to compensate for 25 years of deflation.

Commodity prices had gotten too cheap and are readjusting to more realistic values relative to the rest of the economy. $2 corn and $200,000 combines were out of line; whereas $7 corn and $300,000 combines is a better ratio of corresponding values.

Bubbles are blown from liberal use of leverage. By that definition alone we can rule out the price gain to date as being a bubble. They are not being created via an accumulation of debt.

Farmers are not leveraging, in fact, they are deleveraging. They are paying off debt and those buying farmland are contributing the majority of the cash from equity being used to buy farms. There is no element of speculation being exhibited.

Cash is moving from bank accounts that pay nothing into land that won’t disappear in a Wall Street fraud and that will generate good cash rent payments. This is an equity transfer not a speculative investment. It is based upon solid, but historically unprecedented, fundamentals.

Tens and hundreds of millions of world consumers are being economically emancipated. The first thing they do with new disposable income is buy food, fuel and fiber.

The U.S. consumer went for decades without having to compete with other world consumers who were walled off by poverty and iron curtains from commodity markets. 96 percent of consumers live outside the U.S. That makes the protectionism advocated by the Donald and others pretty stupid.

Certainly, global economic growth can hit a bump and temporarily hit its head, but once people improve their diets they will never go back to going without. Even a slowdown in the Chinese economy is likely to impact demand for industrial commodities far more than it would demand growth for food.

The world changed. U.S. consumers now have to compete for food, fuel and fiber and the good old days of a cheap food policy that subsidized the U.S. consumer through subsidies to farmers to over-produce are gone and they will need to adjust to it.

What they want is everything to be cheap again and that is not likely a wish that will be filled. The commodity markets are doing their job and, if allowed to complete their task of providing the economic incentive to commodity producers to expand production capacity, supply will catch up to demand in the course of due time.

We need to put more land in production in Brazil, see the EU adopt science-utilizing GMO biotechnology and pay farmers and other commodity producers returns on investment of maximum crop inputs.

Weather can throw a wrench into the machinery for a year, but markets and investment will adjust to that, too. Few seem to think the commodity boom is sustainable so that should mean that it has some long legs under it to carry longer than consensus now believes.

Everybody should be bullish at the super-cycle high and pooh-poohing ideas of bubbles, mocking anyone suggesting the prosperity will not be unending.

The commodity sector will require some time to fill the market’s call for expanded capacity. They don’t just clear land and grow 50 bushel soybeans in Brazil in a year.

The commodity sector needs the billions of dollars that are interested in ag investment, but is struggling to bridge the gap between MBAs and farmers to get comfortable with the inherent risk.

So, what if this isn’t the bubble so many expect, but merely the way it is in a world where millions become new consumers every day? Isn’t farmland and commodity assets the best place to put cash?

If Washington doesn’t solve the fiscal crisis, and right now the partisans are locked in political combat as Rome burns, what will dollars be worth?

Moving cash into farmland at $10,000 acre may look really smart six years from now. If we have to leverage agriculture up to blow a real bubble the institutional money should be pouring into agriculture at the top and there will be $10,000/acre mortgages to buy land at much higher inflated prices.

Until there is leverage there is no bubble, just a market that has strong gains based on fundamentals that can change. Markets go up and down but they don’t collapse as a bubble until leveraged.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.