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Banker: Grain prices won’t stabilize soon

By Staff | Sep 13, 2012



FORT DODGE – Farmers can expect commodity prices to fluctuate more often in the future, according to a area businessman with extensive experience in the futures markets and banking.

”While the boom times won’t go away, there will be more ups and downs,” C. Richard Stark Jr., president of Iowa Commodities Ltd. and chairman of the board of First American Bank Group Ltd., said on Sept. 4.

Stark talked about what he expects to see happen in the commodities markets when he addressed the Agriculture Committee of the Greater Fort Dodge Growth Alliance during a breakfast meeting at Perkins Restaurant & Bakery, 511 S. 32nd St.

He also described some of his experiences working at the Chicago Board of Trade. There, he started as a runner in the rough-and-tumble trading pits and eventually joined top executives and a Nobel Prize-winning economist on the board of directors.

Stark gave the audience of about 20 people a quick primer on the purposes of futures markets.

”One has to remember what futures markets are for,” he said. ”They’re to hedge risks. Bankers demand that their producers, depending on their status of how creditworthy they are, manage their risk properly. Producers, depending on their availability to take risks, still have to manage it.”

He identified a number of factors he believes will influence commodity prices in the next five years.

The world economy is one of them.

”The global picture is not as strong as what we have seen,” Stark said.

He said the Chinese economy has ”cooled off” while Europe is in recession.

The demand for corn to produce ethanol was a major factor pushing up prices of that commodity in recent years, but Stark said that demand is leveling off. He said no new ethanol plants have been built recently, and added that it doesn’t appear that more will be built soon.

The introduction of drought-resistant corn to be planted in Texas, Kansas, Oklahoma and other dry areas could depress prices by causing a sudden surge in the corn supply, Stark said.

Because of those factors, Stark said he believes ”it’s reasonable to say that in the future we won’t see sustained spikes one right after another that we’ve seen for almost 10 years.”

But there are also some factors at work that may help to boost prices as well, he said. He said the worldwide supply of commodities remains tight.

He added that although China’s economy has slowed, there’s still a potential for growth there. He said no one knows how much China can grow.

Stark said he believes farming will remain ”relatively good” even in the event of inflation or anything else that destabilizes the dollar.

Because of all those diverse factors, risk management will be essential for farmers, he said.

”The people that are the better risk managers are the ones that will succeed,” he said.

Stark has decades of experience to base his market assessments upon.

He first went to work for the Chicago Board of Trade in the summer of 1969 while he was still a student at Iowa State University in Ames. His first role was as a runner, and work days could literally be rough. He recalled being knocked flat on his back amid all the jostling on the trading floor. Fights broke out periodically, he said.

He returned to the Board of Trade in 1970, and bought a membership in it. He worked there until 1977.

He was elected to the organization’s board of directors in 1982. At his first meeting, he was surprised to find himself seated between the chairman of the board of Sears and George J. Stigler, a Nobel Prize-winning economist from the University of Chicago.

Stark moved to Fort Dodge after working for the Board of Trade. He became the controlling stockholder of First American Bank in 1986.

In 1996, he established Iowa Commodities Ltd.

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