A few months ago I wrote about the volatility of the farming economy - the Invisible Hand of supply, demand, and incentive programs. Today, that picture is more evident than ever as you drive across the plains of Kansas: mounds of grains are piled high outside of elevators that have been at capacity for months. I mentioned the record-breaking yields that farmers have had this year.
Most industries vary their output based on demand. If toy giraffes are all the rage with the age-one-to-three-year-olds this year, you better believe that more toy giraffes are going to saunter off the production line. When the popularity of giraffes wanes, production decreases.
Unlike other types of producers, farmers are much more at the mercy of the elements (rather than demand) to determine their output, and consumption remains relatively stable. So, when output goes up, prices go down and storage overflows.
This begs the question: where does all that extra grain go??