Grains and oilseeds farmers had the chance to hit the jackpot in 2008. And some did.

That’s the assessment of Colorado-based risk manager Steve Barnes, who visited Eastern Ontario earlier this year.

"Farmers had the opportunity to make more money in 2008 than they’ve ever had in their entire lives," said Barnes, who works for FC Stone commodity risk managers.

Corn reached a remarkable peak of $8 per bushel earlier this year but no one got that price, Barnes said. Many farmers locked in forward contracts at very profitable prices up to $5/bushel corn but were kicking themselves as the price continued to climb. Few farmers locked in prices of $6 to $8 because they were feeling badly about their earlier decisions and were afraid to lock in too early again as people were talking about seeing $10 corn, he said.

Then price went down. "It’s human nature. You don’t want to sell on the way down. It’s hard to pull the trigger."

He said he advised farmers to lock in at a profit but some couldn’t bring themselves to sell and now have corn in storage in hopes of prices coming back in a post-harvest rally.

The 2008 bonanza will distort how many people will now view 2009, he said. "They need to erase that from their memory. If you’re waiting to see the same money in 2009 you might be waiting the rest of your lives."

While profits were measured in dollars per bushel this year, next year they could very well be measured in dimes, he said. Barnes states that cost of production has risen so much – largely due to diesel and fertilizer prices – that based on prices in late November, many farmers would find it impossible to pencil out a profit in 2009.

In U.S. dollars, the cost of production for corn was near $2 a bushel in 2007, $3.25 in 2008 and likely about $4.25 in 2009, Barnes said. But if corn prices drop to $2.50 a bushel, who’s going to grow it? he asks. A likely scenario would see farmers cut back on acres while anticipating better prices, he said. After all, inputs costs and price are moving targets. "What farmers should do is get a really sharp pencil and sit down right now and calculate to the penny their cost of production based on today’s prices and watch the major input prices," he said. "They need another eye on forward contracts. When you see a reasonable price available, get them protected."

Many factors blew the price of all commodities, including grains, livestock and oil, right out of the water, Barnes said. There was rapid expansion of money, a demand for ethanol and crop scares due to flooding that spiked the price. Then the banking debacle dropped the stock market prices by 40 per cent and that helped pull down corn, soybean and wheat prices, he said.

Now oil prices have dropped in half and fertilizer prices are slowly coming down. But if the Dow Jones Industrial Average drops another 25 per cent from 8,000 there might not be money or confidence in the market for U.S. $4 a bushel corn, he said.

He said he doesn’t want to paint a doom’s day scenario but farmers will likely scale back unless they can see signs of profit in forward contracts before planting season.

Call Steve Barnes at 1-800-689-2307.