At a recent conference at Clemson University, a group of students asked experts and panelists to contrast today’s agricultural environment with that of the 1970s. Get your bell-bottoms out, tune into those old Credence Clearwater Revival songs, and let’s go cruising through history for the contrasts and comparisons.
The 1970s were a time of volatile and high oil prices due to political conditions, and to some extent the Vietnam War. Politically, the late Earl Butz, Secretary of Agriculture, stated that the United States must feed the world’s growing population with the saying “fence row to fence row” and other words not repeatable in this column. Farms and ranches were in a period of high inflation that encouraged financially leveraging the balance sheet to capitalize on land appreciation. In turn, many lenders loaned money based upon collateral and a handshake with very little financial information. Farmers were driven to specialization to capitalize on technology and markets with a focus on production and little emphasis on management, finances, and marketing.
Now, fast forward to 2008. Yes, political mandates to produce agricultural based energy products is a difference. The world population is still growing, but changing dietary patterns in emerging countries as economies grow in income is impacting agricultural markets. As agriculture production concentrates geographically, weather, disease, and public perspectives concerning food production, distribution, and use can place an industry in profits or peril. Today’s producers and lenders are more astute financial managers compared to the 1970s. That being said, greed and speculation are creating bubble-like conditions that can quickly deteriorate. Agriculture today is more diverse structurally in farm segmentation with more dependence on the non-farm economy.
Similar to the 1970s, there are conditions that could lead to a 1980s-type of agricultural financial meltdown. Some recent quotes by panelists at the Crossroads Conference at Clemson University are useful for those proactively prepared to meet economic adversity created by a possible 70’s-like crisis.
Where do we go from here? The panelists and experts summarized some key points. To be successful, one must know core strengths and values. Second, agriculture is a knowledge industry requiring time and investment in maintaining high skill levels. Third, the agribusiness community must work together as trusted partners. Fourth, now is the time for business growth, but with the caveat of “better is better before bigger is better.” Financially, agriculture at a crossroads must take the high road, thinking and operating within a global context but bringing it down to the reality of the low road, acting on the local level.