MARSHALL -?The general theme of the 2012 Farm Outlook Seminar on Wednesday at Southwest Minnesota State University was risk management, but today's risks come not just from markets and weather, but as far as China and the Straits of Hormuz.
The yearly seminars are organized by the SMSU Foundation and support the foundation's scholarship program.
"They're to help farmers in the area get an idea of production prospects, price, and competition from around the world," said Stephen Davis, professor of agricultural economics at SMSU.
Farmers have always had to contend with weather and consider costs of production of crops and livestock versus future markets. But today, major markets for corn, soybeans, and beef are in places like China and Japan.
"The U.S. is essentially the corn exporter of the world," said John Melius, representing Hurley and Associates agricultural marketing firm. "Two-thirds of all corn that is transported across the oceans comes from our shores."
Melius recently returned from a two-week trip to China and Vietnam and described the experience as "eye-opening."
"China has as many acres in corn as the U.S.," Melius said, "but only 60 percent of the yield. And 70 percent of that is harvested by hand."
Presentations ranged from overviews of grain, cattle, and energy markets, to market volatility and estate planning.
Ronald Remus farms near Sleepy Eye and attended to get an insight into future markets.
"I'm interested in all the aspects of agriculture and marketing," Remus said. "You can never get too much information, especially in this day and age."
According to the assembled experts, market volatility is driven by weather, international events, production and processing capacity, and a host of factors of bewildering complexity.
John Johnson from Hurley and Associates warned that beef growers were facing a situation where meat consumption was declining, but stockyards and slaughterhouses had excess capacity.
"Somebody is not going to make it here," Johnson said. "How far will you have to haul to get them killed? There are more packers than cattle. And it's no fun to kill cattle, they'll find something else to do."
Weather is only one of the long-term unpredictable factors that affect farmers. Today's agriculture producers have to pay attention to geopolitics as well.
James Holland, a risk management consultant with INTL FCStone, talked about energy prices in a wide-ranging discussion that covered the European default crisis, domestic oil production, the chances of war between Iran and Israel, and electric car technology.
"(Israeli Prime Minister Benjamin) Netanyahu finally said, 'We're not going to let my country face annihilation,'" Holland said. "Twenty percent of the world's oil is transported through the Strait of Hormuz which Iran can close at any time. If Israel attacks, that's how $200 a barrel crude oil is made overnight."
Holland and others recommended a variety of risk management strategies to guard against known risks and "Black Swan events," that cannot be foreseen.
"It's like fire insurance," Holland said. "No one ever says, 'Oh my house didn't burn down, I wish I'd never bought that insurance.'"