The Rise and Fall and Rise and Fall of Commodity Prices 14th Annual AgOutlook Conference & Trade Show Matthew C. Roberts, PhD | @YourEconProf 6 December 2018

How big of an impact did this have?

Economic Principle 1: The owner of the scarcest resource accrues all the wealth.

Let’s talk about the commodity cycle…

Why does it matter? Every commodity suffers from cycles… Cycles and Super-Cycles should be managed differently Cycles are supply-driven only, will be cured with one normal production cycle. Super-cycles are supply and demand driven, will take multiple production cycles to cure

What do the tariffs have to do with this? They have deepened the trough by further reducing demand. Tariffs will be less (long-term) problematic for commodities that can rearrange production: Field crops (1 year) Vegetables (if there are some that are/are not tariffed) For others, tariffs prolong the valley Dairy Meat

So what to do now?

In commodity production, the low cost producer always wins. Economic Principle #2: In commodity production, the low cost producer always wins.

So… How well do you know your cost of production? Where can you cut costs? Reassess your family living expenses. Get your spouse involved. Realign marketing and business strategies: Weak balance sheets need less risk, not more. Create a plan…are you fixing or forestalling? Is it time to sell out?

Matthew C. Roberts, PhD | www.kernmantlegroup.com | @YourEconProf Questions? Matthew C. Roberts, PhD | www.kernmantlegroup.com | @YourEconProf

Hogs Dairy Beef Oil Grains