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2008: Year of Crisis and Challenges

posted on January 2, 2009


Winter storm warnings and plummeting temperatures put a chill on New Year's Eve plans for hundreds of thousands of Midwest revelers.

Thousands of homes and businesses had no electric lights for the holiday because of wind damage. Fargo, North Dakota and Brainerd, Minnesota both began the day more than 20 degrees below zero.

Winter is already getting long in North Dakota where a record 33 inches of snow fell in December.

The long term outlook, of course, calls for considerably more of the white stuff before spring.

While that's a relatively safe bet, analysts are less sure about their predictions for rural America in 2009. Most expect the economy to emerge from recession sometime in the 3rd or 4th quarter. But others aren't as confident. Given the turmoil experienced in 2008 it might be wise to look in the rear-view mirror. Andrew Batt looked back at 2008 and filed this report.

In one of the most turbulent and eventful years in recent memory, 2008 began much as it ended – amidst a whirlwind political season.

Gov. Mike Huckabee, R-Arkansas: "I love Iowa..."

Caucus goers throughout Iowa's rural countryside came out in record numbers to choose Republican Governor Mike Huckabee and Democratic Senator Barack Obama.

Sen. Barack Obama, D-Illinois: "But on this January night, on this defining moment in history, you have done what the cynics said we couldn't do."

As Obama, Hillary Clinton, and John McCain slugged each other throughout a brutal primary campaign, rural America faced a number of challenges.

Only six months after President Bush signed a sweeping energy bill favorable to biofuels, corn-based ethanol came under worldwide criticism. The United Nations pointedly labeled corn biofuel a "crime against humanity" for its potential impact on global grain supplies.

But while a variety of factors sent commodity prices upwards, critics blamed solely ethanol for higher food prices at the supermarket. Farm-state lawmakers pushed back.

Sen. Charles Grassley, R-Iowa: "When a farmer gets so little out of a box of Corn Flakes don't be blaming the farmer and ethanol for the high price of food."

Much of the run-up in food prices was traced to skyrocketing energy costs – especially crude oil which peaked at record highs of nearly $150 per barrel in July. As oil markets shot into a seemingly never-ending upward spiral, lawmakers questioned the motives and business plans of energy company executives.

Rep. John Larson, D-Connecticut: "When it's between heating your home or freezing to death that's not much of a choice. You know, when it comes down to whether or not you're going to be able to get back and forth to work that's not much of a choice. It's what my grandfather used to says, 'trust everyone but cut the cards."

Peter Robertson, Chevron Corporation: "We're doing our damnedest to fix this as much money as our company can with the people that we have and the infrastructure that exists."

Speculators were a common theme amongst industry experts attempting to peg higher commodity prices on extenuating factors outside of supply and demand.

Mark Pearson: "A wild market this year, incredible demand, record prices." (March 7, 2008)

Sue Martin: "I think corn is going higher. I look for the July futures to get to $6.33."

Under increasing attention, commodity markets unprecedented rallies as wheat, corn and soybeans set new record highs.

John Roach: "…if we have any weather problem at all they'll be at higher levels than where we are right now."

The concern that weather could adversely affect commodities was everywhere in farm country. Oversaturated farm fields and streams across the Midwest reached a breaking point by mid-year.

(slug rushing water)

Millions of acres of farmland and entire cities were wiped clean by the floods of 2008.

Max Lamb, Waterloo, Iowa: "I hope that levee holds or my business is gone."

The nation's top corn and hog producing state of Iowa was considerably damaged by record flooding.

Gov. Chet Culver, D-Iowa: "We are a determined people, we are hard working and we love this state and because of that I have the level of confidence I do about the future of Iowa as well."

The 500-year floods in Iowa eventually dumped into the Mississippi River basin, a main shipping lane for grain supplies. The Army Corp. of Engineers shut down more than 200 miles of barge traffic along the River keeping upper Mississippi terminals plugged with grain and empty barges idling downstream.

President George W. Bush: "I tell people that, you know, often times you get a hand you didn't expect to have to play, and the question is not whether you're going to get dealt the hand. The question is how do you play it. And I'm confident the people of Iowa will play it really well."

Midwestern farmers were pushed to the breaking point on spring planting but many producers were able to get into their fields by late June. As rural America braced for disaster, lawmakers in Washington were still trying to pass the 2007 farm bill…in mid-2008.

Rep. Rosa DeLauro, D-Connecticut - "A vote of 318 --it's very sweet!"

Rep. Randy Neugebauer, R-Texas - "This is a victory for America. It is important America has a strong agricultural economy."

Rep. Bob Goodlatte, R-Virginia - " We have not a 2-to-1 majority, but 3-to-1 majority vote. A 318-to-106 vote is very significant."

The farm bill eventually passed with broad bipartisan support – enough to override President Bush's veto. The President opposed the new farm bill based on what his Administration deemed excessive costs. But concern over government spending was tossed aside months later in the face of a growing financial crisis.

Sec. Henry Paulson, Treasury Department: "I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to ten years. I am suggesting that we should and can have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change..."

"Government bailouts" quickly became a dinner table discussion as the Federal Reserve began pumping billions of dollars in the direction of America's financial institutions. The ongoing crisis seemed to dwarf all other issues in the closing weeks of the 2008 Presidential election – even surpassing the summer's hot-button issue of off-shore oil drilling.

Sen. John McCain, R-Arizona: "Drill here. Drill now!"

On election night, Illinois Senator Barack Obama was elected the nation's 44th President of the United States.

President-Elect Barack Obama: "The road ahead will be long. Our climb will be steep. We may not get there in one year or even in one term. But, America, I have never been more hopeful than I am tonight that we will get there. I promise you, we as a people will get there."

Back in the corn belt, some ethanol producers lost a long battle to stay afloat. Ethanol maker VeraSun Energy succumbed to rapid expansion, high corn prices, and a contract hedging scheme gone bad when the company filed for Chapter 11 bankruptcy this fall.

The closing weeks of 2008 were centered on more negative economic news including the ongoing debate over government loans to American car companies. While President Bush eventually agreed to offer government loans, the bleak reality of recession, home foreclosures, and deep losses on Wall Street had dealt a vicious blow to the American economy. With 2008 in the rearview mirror, many economists predict a turbulent 2009 could be on the horizon, but some see a glimmer of hope.

For Market to Market, I'm Andrew Batt.

 


Tags: agriculture Barack Obama ethanol food Iowa news renewable fuels rural