Is Agriculture Overreacting To A Hint Of A Market Downturn?

The age-old riddle asks what came first, the chicken or the egg? In agriculture these days, however, the riddle might be better worded as what came first, the market downturn or the response to it?

For anyone paying attention, the past few years for agriculture have been truly “the best of times.” Commodity prices have remained high as demand as increased. In turn, this has allowed farm income to climb to an incredible $130.5 billion in 2013. And much of this has inevitably made its way into many of the bank accounts of those companies that cater to agricultural needs. This includes fertilizer suppliers, equipment manufacturers and, of course, ag retailers.

But with this streak of success comes the desire to see things continue to grow perpetually. And that’s usually not how any economic system works. Sooner or later, a downturn does occur.

And that’s starting to happen to agriculture right now. In February, USDA released its projections for farm income in 2014. According to this report, incomes will drop 27% this year to $95.8 billion. USDA blames declining commodity prices for this slide.

As a result, growers are expected to plant significantly less corn in 2014 compared with the past few years. Right now, USDA is projecting 91.7 million of acres of corn will be planted this year, a decline of 6% from the 2013 total. This has led to doomsday-ish headlines in the popular media such as “Corn Farmers’ Seed Of Doubt,” which appeared in a recent edition of the Wall Street Journal.

Unfortunately, these “hints” of a market downturn in agriculture has caused many companies to begin pulling back on there plans for 2014. Already, several fertilizer suppliers have announced employee layoffs. Likewise, a few equipment manufacturers have began scaling back on their marketing and production plans for the second half of the year.

To those in the know, all these moves tie back to a number — and it’s not a sales or crop acreage figure. It’s a year.

In mid-2008, everyone remembers that high fertilizer prices led to a significant market crash. Ag retailers that stocked up on fertilizer during the spring were forced to write-down millions of dollars when inventories failed to move by the end of year. Since then, many of the players in ag have been quick to overreact to any bad news.

In my judgment, it’s too soon for such dramatic steps. True, farm incomes and corn acreage are down. However, $95.8 billion is still a lot of money and 91.7 million acres of corn is still a lot of corn. Also, there are some significant unknowns on the horizon that could shift commodity prices back up. This includes the ongoing crisis involving the Ukraine (which ranks fourth in the world in exports of corn and wheat) and the U.S. weather (which has been very unpredictable the past few seasons).

The bottom line is simple: Hints are great in some instances, but nothing should trump good old solid facts. Right now, these are hard to come by.

Leave a Reply

Eric Sfiligoj Stories

Trimble TMX-2050 In-Cab Display
Eric SfiligojPrecision To Lead Agriculture In 2017?
January 16, 2017
Another new year is upon us! And I’m certain I speak for many in the agricultural world when I say Read More
Corn
Eric SfiligojThe Mood From Madison? In A Holding Pattern
January 16, 2017
Last week, I had the chance to attend the annual Wisconsin AgriBusiness Classic show in Madison, WI. It’s been a Read More
Donald Trump
Eric SfiligojTrump’s New Ag Secretary Coming Soon?
January 9, 2017
As agricultural experts are quick to point out, incoming President Donald Trump largely has the nation’s growers to thank for Read More
Eric SfiligojAgriculture In 2017: Attack Of The Clone?
January 1, 2017
Happy New Year, everyone! At least, I hope so. When 2017 was fast approaching, many people asked me how I Read More
Trending Articles
AgriSync
Matt Hopkins17 Agriculture Apps That Will Help You Farm Smarter In 2017
December 9, 2016
Ag professionals are working smarter, not harder, than ever before. Smart farming technologies have enabled them to reduce costs, maximize Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Monsanto sign
Crop InputsMissouri Governor Meets With Bayer CEO To Discuss Monsanto Merger
November 21, 2016
Missouri Gov. Jay Nixon visited Bayer AG global headquarters in Leverkusen, Germany, on November 18 to discuss the proposed Bayer-Monsanto Read More
Latest News
Young Corn Plants
ManagementTimac Agro USA Acquires Michigan Ag Retailer
January 20, 2017
Timac Agro USA, an agriculture supply company specializing in high-efficiency plant and animal nutrition products, has acquired St. Louis,MI-based A&E Ag, Read More
Soybean field
Crop InputsNufarm Teams Up With John Deere Financial
January 19, 2017
Nufarm and John Deere Financial have teamed up to help farmers grow a better tomorrow. This program helps make purchases Read More
Sonny Perdue
LegislationTrump Formally Picks Perdue As Agriculture Secretary
January 19, 2017
U.S. President-elect Donald Trump officially announced Sonny Perdue as his choice for secretary of agriculture on Thursday, selecting a former Read More
ManagementPresident Trump, Wisconsin Review, and a Dow-DuPont Upd…
January 18, 2017
Editors Paul Schrimpf and Eric Sfiligoj reflect on a new administration, a recent winter show, and crop protection company mergers. Read More
Industry NewsBayer, MS Technologies Get China Approval For Balance G…
January 18, 2017
MS Technologies and Bayer have received import approval from China for Balance GT soybeans. The new Balance GT Soybean Performance Read More
Werner Baumann, Bayer AG, and Hugh Grant, Monsanto
Industry NewsReport: Monsanto, Bayer CEOs Among Latest to Make Trump…
January 18, 2017
The chief executive officers of German chemical giant Bayer AG and U.S. seed behemoth Monsanto, Werner Baumann and Hugh Grant, Read More
Giant Ragweed
HerbicidesStudy: Focusing On Weed Seedbank Can Help Manage Herbic…
January 18, 2017
Researchers writing in the latest issue of the journal Weed Science provide important insights on the control of herbicide-resistant giant Read More
Management3 Financial Trends To Watch In Agriculture
January 17, 2017
I recently had the opportunity to attend a meeting of credit managers for Midwest ag supply and input companies, in part Read More
Andersons Retail Store
CropLife 100The Andersons To Close All Retail Stores; Shutdown Does…
January 16, 2017
In a stunning announcement to the Toledo area, The Andersons Inc. said on Sunday that it would close its two Read More
Trimble TMX-2050 In-Cab Display
Eric SfiligojPrecision To Lead Agriculture In 2017?
January 16, 2017
Another new year is upon us! And I’m certain I speak for many in the agricultural world when I say Read More
Corn
Eric SfiligojThe Mood From Madison? In A Holding Pattern
January 16, 2017
Last week, I had the chance to attend the annual Wisconsin AgriBusiness Classic show in Madison, WI. It’s been a Read More
Syngenta Sign
Crop InputsAccenture Helps Syngenta Transform Its Global Logistics
January 13, 2017
Syngenta, a leading agriculture company, has collaborated with Accenture to design and implement a new digital logistics operating model across Read More
Fall Creek Seth Harden The Nature Conservancy
StewardshipLocal Farmers’ Watershed Initiative: Continuous Improve…
January 13, 2017
The goal in the Big Pine Watershed Project is to more intentionally do what local farmers and responsible ag retailers Read More
HerbicidesEPA Expands Enlist Duo Herbicide Registration To 34 Sta…
January 13, 2017
The U.S. EPA has expanded the geography for application of Enlist Duo herbicide from 15 to 34 states. This means Read More
Olson Ag Enterprise
CropLife 100Wilbur-Ellis Acquires Nebraska Seed Retailer
January 13, 2017
Wilbur-Ellis’ Agribusiness, a recognized leader in precision agriculture technology and the distribution and marketing of plant protection, seed and nutritional Read More
ManagementDeere-Precision Planting Update and the Ag Secretary Wa…
January 12, 2017
Editors Paul Schrimpf and Eric Sfiligoj provide the latest on the court date for John Deere/Precision Planting and the quest Read More
Monsanto sign
Seed/BiotechMonsanto, NRGene Form Agreement For Big Data Genomic An…
January 12, 2017
Monsanto Co. and NRGene have announced that the companies have reached a non-exclusive, multi-year global licensing agreement on NRGene’s genome-analysis Read More
AGCO Custom applicator
SprayersAGCO, Asmark Institute To Offer Training For Beginning …
January 11, 2017
AGCO Corp. and the Asmark Institute are collaborating to offer a new training program dedicated to educating and developing custom Read More