A vicious circle

Monday, December 10, 2007

High oil prices have a ripple effect on the prices of nearly everything we purchase, from gasoline to groceries to clothing. All of these items are affected by oil prices, but a change to a more diverse energy economy with alternative and renewable fuels has driven up the cost of many of the crops grown here, which are raw materials for many items.

An increase in the price of corn and soybeans is good news for the farming community, but farmers are also affected by higher oil prices because fuel and fertilizer, two of the major input costs for farmers, are directly affected by oil prices.

A commodity that we don't often hear about in the news is also at a premium. U.S. hay prices are the highest since record keeping began in 1949, according to the National Agricultural Statistics Service. In some areas of the country, hay prices have surpassed $200 per ton.

Commodities experts say more farmers are planting corn and wheat to capitalize on high prices, leading to a shortage of other feed crops, including hay. That, in turn, is leading to more scams.

When prices on any commodity soar, the number of complaints to authorities about fraud almost always increases as well. Livestock producers are being victimized by dealers who don't always keep their word. In an Associated Press story, one hay producer recalled losing $50,000 that a dairy farmer paid him in the 1980s for a load of premium alfalfa hay. A truck driver they both knew offered to haul the hay to the dairy farm west of Washington's Cascade Range, then sold it to someone else and pocketed the money.

If there's an easy way to make money, leave it to less than honest folk to exploit the situation.

Hopefully, oil prices will stabilize or decrease and the alternative energy market will get in sync with crop production and some level of balance will return to the market. Until then, watch those pennies -- you're going to