Recent weeks have been bad for agricultural commodity producers, with falling prices impacting Pennsylvania's farmers. An economist in Penn State's College of Agricultural Sciences said there are reasons why prices for corn, milk, soybeans, beef, pork and wheat have fallen sharply.

James Dunn, professor of agricultural economics, noted that what appears to be plunging prices are actually a price correction, after a year of climbing prices due to global demand and an extremely tough summer of floods and droughts nationwide.

"For the last several weeks, prices for basic commodities have been going down sharply," Dunn said. "Some went down a few weeks ago, others went down recently, but all basic agricultural commodities that are of interest in Pennsylvania have dropped in the last two months -- pretty substantially in most cases.

"Some by 20 percent, others by just 10 percent, but all are down considerably. Corn and soybeans have bounced back somewhat this week but still are well below their levels in early September."

Dairy farmers are especially hard-hit, because the price they're getting for raw milk has dropped drastically while the price of feed grain has not gone down as much, according to Dunn. The disparity is compounded by excessive spring rain, summer drought and flooding in the Northeast and record drought in the Southwest. The harsh weather wiped out much of the feed corn and forage crops intended to feed dairy herds.

"It's been a bad year for on-farm feed production, so a lot of farmers will be going out to buy stuff they thought they already had produced," he said. "So, they spent money to plant crops they didn't get, and now they have to spend more money to replace them."

Dunn said because the weather in the Midwest has improved in recent weeks, the corn crop should be better than projected earlier in the summer -- a much-needed break, since Eastern farmers probably will have to buy supplemental feed and forage at premium prices.

Another culprit is Wall Street, Dunn explained, as speculators jumped in to take advantage of a well-known economic indicator, driving prices higher than the norm.

"A lot of times, if you have a national economic recovery coming, the basic commodities lead the recovery," he said. "So, people with no interest in or understanding of agriculture invested in commodities because they were looking to make money.

"But once it became clear that the U.S. economy was not recovering, and that we actually may be at risk for a double-dip recession, these people fled from the basic commodities because they were afraid prices would go back down. And of course, their departure back into cash and out of agriculture meant that the commodities lost value because there weren't buyers willing to step in at those high prices.

"To some extent, they created an investment 'bubble' of higher-than-reasonable commodity prices."