At a high school class reunion the conversation is usually reminiscing prom dates or updates on grandkids. But when the Taylorville Class of 1966 gathered last week, grain prices and farm profitability also filtered into the conversation. Former school teacher, turned farmer, Lonny Stalets of Assumption observed the lessons taught him by his late father-in-law no longer held in today's nouveau agriculture. You can no longer finance a farming operation one year with the income from the prior year.

Demands by fertilizer dealers for pre-payment of nitrogen that will not be applied for 8-10 more months, which will be needed by a crop that will not be harvested and ready for sale for another 15 months has torn asunder the typical cash flow of Cornbelt farmers. Stalets would normally be ordering anhydrous ammonia now for application ahead of planting the 2009 corn crop and paying for it with funds from the sale of the grain more than a year from now. That is not happening anymore, because of the globalization of the fertilizer industries which are requiring orders and pre-payment as much as a year in advance of delivery

For Lonny and the hundreds of thousands of Cornbelt farmers like him, that requires a new level of financial management, which undoubtedly will involve small town banks in farming communities, which depend on larger banks for sources of credit. Ooops! When the nation's largest banks are on their back with arms and legs in the air, you are reminded of that classic famous understatement, "Houston, we have a problem."

Commodity price watchers are well aware that corn prices have lost $3 and soybean prices have lost $6.50 in the past three months, all because of the unwinding of the financial network resulting from subprime mortgages. To cover their mortgage losses the major investment bankers pulled their money out of the commodities market. Grain prices deflated, not due to supply and demand fundamentals, but due to the need for Wall Street banks to liquidate their investments at any cost. Suddenly farmers who bought nitrogen-rich anhydrous ammonia at $1,000 per ton to fertilize their 2009 corn crop that was worth $7.50 per bushel at the time, are now looking at $5 corn which may not cash flow in the wake of rising seed, fuel, and cash rent expenses also.

Ken Harrison, a noted national authority on agricultural risk management, observed this week, "There are going to be more farmers go broke at $5.00 corn than $2.70. This is evidence of the need for more risk management in terms of "revenue management." And where does revenue management begin? For many farmers it will mean finding the offices of commercial bankers and Farm Credit loan officers which have been accumulating cobwebs for the past two years of high grain prices.

Will those lenders be up to the task? The challenge will be for those lending institutions to supply agricultural credit in the wake of Wall Street's meltdown, in the wake of declining farm profitability, and in the wake of the new cash flow timing that challenged Lonny Stalets. Farm financial specialist Paul Ellinger at the University of Illinois says farm lenders are not immune to problems, but are in generally good condition in Illinois. He says only 3 of the 496 Illinois agricultural banks are considered by the FDIC as under-capitalized and the two Farm Credit Systems in Illinois have sound balance sheets.

But what it means for farmers is that the traditional annual operating loan written early in 2009 will be needed to pre-pay for fertilizer that will not be delivered until the 2010 corn crop that will not be sold until 2011. That is the point of Harrison's observation about the need for revenue management plans that will stretch from one to two years in length.

I think that is a more interesting conversation than who you took to the Senior Prom, but maybe it is because I didn't go.