Agricultural economics in the first six months of 2017 can be summed up in three words: uncertainty, reflection and hope. Of course, global trade has moved front and center in the agricultural landscape. Actions on NAFTA (North American Free Trade Agreement) and TPP (Trans-Pacific Partnership), elections in Europe, and negotiations with China encompass all three words. Now, past the halfway point of the year, many are asking how long this economic reset will continue. Well, it appears that economic pressure will continue to mount into 2018 and 2019 if the economic climate does not change dramatically.
Financially, the challenge has been multiple years of marginal or negative profits, which diminished working capital and reserves for many. Now, producers are relying on equity, usually in land, and the ability to refinance and restructure debt.This step affords one the necessary time to make adjustments in the business and to revive a positive rate of return. However, the length of this economic bridge depends upon the quality of land and equity, as well as the lender’s ability to accommodate refinancing requests. Most importantly, the producer must implement expense and revenue adjustments on the business and personal ledgers with a sense of urgency.
Crisscrossing the agricultural landscape, I have noticed some trends emerging over the last six months. What are some of the big ones?
1. Consolidation has become increasingly apparent, particularly, on the commodity side of the industry with a drive towards efficiency in operations, size and finances.
2. Entrepreneurial and value-added agriculture is emerging in larger cities and satellite cities throughout the country. Some are marketing domestically, while others market internationally.
3. After time in business, government, military, education or other endeavors, boomerang producers are returning to their roots and bringing new shape to agriculture.
4. As always, consumer change is driving the marketplace. For example, Delta Airlines serves GMO-free pretzels, and cookies made with eggs from cage-free chickens. And yes, these little snack bags reach millions of travelers every day, many of which are reading the labels.
5. Generation Z, or those born between 1995 in 2012 are just entering the workforce and beginning to influence the consumer marketplace.Of course, the Millennials are still transforming world dynamics, but Gen Z is already started reshaping the workplace.
Well, the dynamics of agricultural economics are certainly not boring! We are set up for an interesting second half of 2017 that will carry over into 2018. Stay tuned!