Farm futures: Sizzling commodities market puts the heat on farmers

NEW ORLEANS — Farming has always been a risky business, at the mercy of bad weather, wars and drought. Now farmers' profits face a new and surprising enemy: speculators who some believe are driving prices up so fast that growers are getting locked out of top dollar for their crops.

Shoppers are feeling it, too, as investors pump billions of dollars into agricultural commodities and, insiders say, help push up the price of the most basic of foodstuffs, a loaf of bread.

"It's been very stressful for all of us to manage marketing this crop," said George LaCour, a grain farmer near Morganza in southeast Louisiana.

LaCour sold more than half his 2008 crop before planting it, hoping to cash in on soaring prices. Selling the rest will have to wait until after the harvest, since he has limited bank-borrowing power to hedge his future crops against price swings, and he doesn't want to risk the money.

"Nobody wants to take the risk," he said.

Agriculture economists nationwide are edgy about what they see as a flood of speculative money into the market, and they want action, fearful that it is throwing the markets into chaos and making it harder for farmers to manage their risks.

"We want the government to investigate, and if there are significant issues, we want them to work through what should be done," said Chad Hart, agricultural economist at Iowa State University. "Right now, I don't think anyone has a full grasp on what's going on."

The Commodity Futures Trading Commission, which regulates U.S. futures and options markets, will make an attempt with a hearing on Tuesday.

The panel can expect to find a sizzling market — some say too hot to handle — stoked for two years by profit-hungry cash from index funds and speculators and skyrocketing prices for in-demand corn, soybeans and wheat.

There has also been a rise in planting: The Agriculture Department said wheat production, for example, grew from 1.8 billion to 2.06 billion bushels from 2006 to 2007, and more than 63.8 million acres of wheat will be planted in 2008, up 3.4 million acres from 2007.

And there is nervousness. Some grain buyers, wary of the market volatility, are limiting contract dealings with growers, effectively cutting farmers off from top prices at a time when production costs have soared, insiders say.

Consumers, too, are feeling the impact.