Farmers find themselves on right side of food inflation

The steepest run-ups in food prices since 1990 are hurting grocery shoppers, restaurants and school cafeterias – but making others rich.

The winners in the new food economy include crop farmers selling corn and wheat for near-record highs after years of crushingly low prices. Ingredient makers like Cargill and ADM are rife with profits. Fertilizer and tractor companies also are cashing in.

Hedge funds that made big bets on rising wheat, soy and corn were spectacularly correct. Oil and gas companies, too — it takes natural gas to cook those Wheaties and diesel to haul them around the country.

Travel along the nation's food chain and you'll find some of the biggest profits closest to the land. The nation's farmers, who raise everything from cows to cucumbers, saw their average household income climb about 7 percent last year to more than $83,000. But in grain-rich states, the results were dramatically higher. In Minnesota alone, the median income for crop farmers soared 80 percent to $95,000.

Chad Willis raises corn and soybeans on 550 acres near Willmar, some of the nation's best corn-growing country. He sells his grain nine miles up the road from an ethanol plant he invested in.

Willis isn't saying how much he made last year. While he acknowledges these are good times to be a farmer, he says he's not pulling in as much as the median income for crop farmers.

“Most people are excited, yes, but cautious about when things are going to turn around, and how hard it's going to turn around,” he said.

In between Willis' farm and town, the owners of Haug Implement are having some of the best times anyone can remember. The Deere & Co. dealer sells farm tractors that can run to $160,000 or more and combines that can cost $300,000, a major investment even in the best of times.

Owner Donald Haug Jr. says it wasn't long ago that he couldn't close on new equipment unless he narrowed the gap between the trade-in and the sale price to $10,000.

“We're seeing some substantial purchasing, and we're talking over $100,000, and the guy just strokes the check for it.”

The boom times in farm country have arrived. Corn, soybean and wheat prices are at or near record highs, driven by a combination of high demand and new money from hedge-fund traders who used to show little interest in those markets. Over the past 20 years, Minneapolis Grain Exchange trading volume rose almost sixfold to a record last year. That's because, in the frenzied trading, the same commodities are changing hands far more than they used to.

“Grain farmers are making a hell of a lot of money,” said Peter Georgantones, president of Investment Trading Services, a commodities brokerage in Bloomington, Minn. “I got grain farmers — a ton of them — who are going to improve their net worth this year — net, now — by a half a million bucks minimum. For one year. That's a nice gain.”

Newspapers cover much of the floor in his office and 22 yellow Post-it notes cover much of his desk, where one computer terminal shows nothing but commodity prices. Every few minutes his phone rings with a call from a farmer checking crop prices.

“These guys, they grow 60-, 70-, 80,000 bushels of beans,” he said. “I got guys sitting on $2-, $3 million worth of grain right now. Farmers are making good money.”