The Downside Of Caution
At some point, you have to cease being a skeptic and begin seeing that better times are just ahead.
February 1, 2010
If you are an avid follower of the news like myself, you probably end up scratching your head in confusion on a daily basis. By all economic indicators, The Great Recession of 2008-09 has ended. The nation’s economic health is beginning to improve and production output for durable goods is making a comeback. However, when pollsters talk with the companies that are benefiting from these gains, most of them sound as if they refuse to believe things are on the way up. Most are avoiding spending money on things that could spur economic growth such as expansion and hiring. This is one of the major reasons why economists predict unemployment will remain a serious issue for three or four more years.
Now I’m all for caution. After all, it was what many analysts have termed “irrational exuberance” for spending and accumulating debt that led the nation down its current path. But at some point, you have to cease being a skeptic and begin seeing that better times are just ahead.
Thankfully, the ag retail industry seems to be avoiding this “irrational caution.” At the various winter trade shows in January, manufacturers and dealerships were not only positive on their outlooks for 2010, they seemed to be actively trying to encourage the market along. Many were investing in plant expansions or slowly adding workers in anticipation of economic improvement. Considering that many of these same companies were forced to take write-downs on unsold fertilizer inventory and watched grower-customer fall by almost half in 2009, this was impressive indeed.
As example of this trend in action, consider Crop Production Services (CPS). The nation’s largest ag retail just opened a brand new, state-of-art fertilizer facility in Marston, MO, in November. This location is capable of holding 51,000 tons of dry fertilizer and 18,000 tons of liquid, enabling it to service most of CPS’ outlets in Central Missouri and Northern Arkansas.
According to general manager Steve Martin, CPS spent approximately $15 million to construct this facility, which still came in under the budgeted amount. When I asked him if spending this much money to cater to a marketplace that had been relatively flat to down during the past two seasons was difficult, he said no.
“Fertilizer usage hasn’t really dropped that much here and this facility represents an investment in the future of our company,” said Martin, pointing to his map. However, he added: “But it is a good thing this facility was built when it was in mid-2009 and not the year before.”
Hopefully, this “things are improving” attitude will begin to spread out from ag retail to the rest of the country. After all the negative news we’re heard since the end of 2008, it would be nice to finally have some positive stories to tell . . .