December 26, 2019

Northwest FCS News

As with tradition, this article is a review of the year’s perspectives. However, as we close down the second decade of the 21st century, this article will also embellish upon some of the viewpoints from the beginning of the century.

Y2K was the talk of the town at the dawn of this century. Significant human and technology investments were focused upon the possible global shutdown of computer systems, which thankfully never occurred.

As I travel across the U.S. on country backroads and near urban metroplexes, I have observed wind turbines, solar panels, and fracking support businesses. These energy sources were not observed at the beginning of the century and have brought stability to the energy complex, which is vital for a stable agriculture industry and general economy. The U.S. is now the world’s number one producer of energy followed by Canada in fourth and Mexico in eighth. The amount of energy produced in North America could not have been envisioned by many prior to 9/11. 

Who could have imagined the great commodity super cycle spurred by the combination of ethanol production and the rapid growth of emerging nations such as the BRICS (Brazil, Russia, India, China, and South Africa) and KIMT (South Korea, Indonesia, Mexico, and Turkey)? At one time, the growth of these nations represented nearly 50 percent of global growth! Hungry for the food, fiber, and fuel produced by rural America, the super cycle really elevated agriculture and rural economies. The super cycle reached its apex in 2012. Now, this decade has observed the leveling off of demand from these countries and the maturation of the ethanol industry. These factors have reduced farm margins. A combination of record farmland values and increases in appreciation and profits have resulted in a seven-year period of a resilient agriculture industry rather than the financial crisis of the 1980s. 

Global competition has ramped up over the decade. While corn production has increased 20 percent in the United States, corn and soybean production in South America (primarily Brazil and Argentina) has increased five-fold. U.S. agriculture is observing a decline in export market share for both corn and soybeans. Market share for these important commodities is nearly one-third, down from 75 percent four decades earlier. 

In this decade, the rise of substitutes in the U.S. and globally will go down in the history books of agriculture. The Impossible Burger, lab cultured production, and alternatives for milk could never have been imagined a decade earlier. The troubling aspect is the momentum and the acceleration of alternative products in countries that are major trading partners with the United States.

The consolidation of agriculture is a hallmark of the second decade of the century. Machinery dealerships, cooperatives, and other agribusinesses are observing this trend. Consolidation means farmers and ranchers have fewer alternatives for purchasing supplies and equipment. The advent of the googlization of agriculture has led to an acceleration of online purchasing and cooperative buying. Fewer, larger processors are creating less alternatives to market products, which will be challenged in the next decade by producers, consumers, and the political spectrum. 

Accelerated by social media and more disconnected urbanites, non-governmental organizations (NGOs) and other advocates have ramped up throughout the past decade. This is only the beginning for agriculture.

Despite all these challenges, some producers have stepped up their game. Many are more engaged in marketing in an environment of low margins and high volatility. Others are more engaged in their financial and business management systems to reap the benefits of small, incremental profits rather than swinging for a home run. Many producers are finding that knowledge and networking with the right individuals is paying dividends, which will carry over into the next decade. 

My team and I wish you well over the holidays and in the upcoming year. Take time to relax, reflect, and rejoice in the blessings that have been bestowed upon us. See you in the next decade to kick off the New Year!