It’s easy to get caught up in this season’s crop, this summer’s pasture growth or this fall’s corn prices. It’s not so easy to stop and take a look around at agriculture in general and at what’s coming down the pike.
But that’s just what Purdue ag economists Sally Thompson, Allan Gray and Mike Boehlje did recently, calling their July white paper simply The Long View. Here are the five factors they think will shape the future of agriculture:
— The intersection of agriculture, food and energy policy;
— Global and local influence of demand and supply for ag products;
— Resurgence of risk in agriculture;
— Increasing strain on natural resources; and
— Role of biotechnology in redefining agriculture.
At the intersection
Not a day goes by that someone somewhere doesn’t write about the interconnection of food prices, energy prices, ethanol and farming. The Purdue thinkers point out, however, that current market conditions are not market driven, but policy driven. The current energy policy, specifically the Renewable Fuel Standard calling for 36 billion gallons of renewable fuels by 2022, has been a major influence in the rise in corn, bean and wheat commodity prices.
Good for grain producers, not so good for livestock and milk producers facing high feed bills. That pinch may have the unintended consequence of increasing consolidation.
Will pressure from consumers and livestock producers trigger another policy shift? Could happen.
It’s a small world
We’ve all heard the predictions that as consumer diets worldwide shift from vegetable to animal protein, the U.S. will benefit. Indeed, U.S. ag exports have grown dramatically in the past two years (although that’s as much a function of the dollar’s declining value, as it is demand).
But as domestic input costs, regulations and finite resources limit U.S. production, will the demand move to other suppliers around the globe? The ag economists are blunt: “… agricultural production can be expanded more cost effectively in other countries than it can in the U.S.”
The local food or organic food markets are growing, and that will help some producers, but not all.
Commodity prices are strong. Life is good.
Well, not exactly. In this year alone, production costs for corn have increased 58 percent, the economists say. Land values, particularly land rents, are likely to jump 10 percent to 25 percent.
All of a sudden, that margin between cost of production and market value — that little thing we call profit — is narrowing.
“In this uncertain environment,” the Purdue experts say, “there is both increased opportunity to succeed and increased opportunity to fail.”
Pass the Tums.
Don’t open up the CRP acres. Don’t build that livestock farm here. Write a manure use plan. Limit your water use. Monitor your farm’s air quality.
Agriculture has made amazing strides in natural resources conservation and environmental protection, and we don’t want to slide backward. But expect pressure on you to do more.
Will the future mix of natural resources management, technology and regulation be workable and acceptable to consumers, a growing market and farmers? Or will it be a heavier burden?
The recent advances in agricultural production came largely through the physical and mechanical sciences, the economists say. Now it’s time for the biological sciences. Biology and biotechnology will replace or complement chemistry and the mechanical sciences as the fundamental base for new productivity advances.
Plus, biology and biotechnology will redefine agriculture, period, because “… it dramatically expands agriculture’s role as a raw material supplier for a broader set of industries,” the economists write.
We’re not just a food and fiber industry anymore. We’re a health and nutrition, bioenergy, plastics, pharmaceutical, home improvement and fuel industry, too.
It’s a lot to digest. But the consequences of focusing only on today and not taking the long view could be disastrous for your farm. Stay on top of what’s going on around you.