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

Eric SfiligojMonsanto ‘Picks Its Battles’ by Nixing Deere Deal
May 23, 2017
Having been in the trade journalism game since the mid-1980s, I remember several watershed moments during my career. One of Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Dow DuPont
Eric SfiligojCrop Protection Mergers: Entering the Endgame
May 1, 2017
One year ago, plenty of people within the ag market were openly wondering what the industry would look like once Read More
Eric SfiligojHope for Application Equipment Sales
April 24, 2017
The old saying goes that a “rising tide lifts all boats.” If this is indeed the case, then things may Read More
Trending Articles
Migrant farm workers
LegislationTrump: Immigration Crackdown Won’t Impact U.S. Agriculture
May 16, 2017
President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Case sprayer nozzle closeup
EquipmentSpray Application: A Nozzle Renaissance
May 2, 2017
If you had asked four-decade ag veteran Mark Bartel, President of Wilger Inc., just a few years ago what lay Read More
ManagementWashington Update, Dow-DuPont Earnings, and the Passing of an AGCO Legend
April 27, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about the latest Beltway news, crop protection company 1st quarter numbers, and the Read More
Crop InputsFlying Under the Radar No More, FMC Goes Big
April 13, 2017
Describing FMC as “under the radar,” admittedly, is probably a stretch. But in a snap of the fingers, FMC upped Read More
Young Corn Plants
Crop NutritionStill Hunting Yields
April 1, 2017
There’s no denying it — the agricultural marketplace today is undergoing a fundamental shift in fortunes. Not too many years Read More
Latest News
ManagementTrip Report, PSM R.I.P, and Ag’s Reaction to Federal Bu…
May 25, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about their recent travels, the end for Process Safety Management (PSM), and how Read More
Corn soil
LegislationARA Member Testifies Before Senate Ag Committee
May 25, 2017
Agricultural retailers stand on the front-lines of the American economy. As trusted advisors to America’s farmers, ag retailers are uniquely Read More
Young corn plants in soil
Crop InputsFortenza Insecticide Seed Treatment Receives EPA Regist…
May 25, 2017
Fortenza seed treatment insecticide from Syngenta has received registration approval from the U.S. EPA for use on corn and cotton Read More
ManagementFarm Market iD’s Agriculture Database Now Covers More T…
May 25, 2017
Farm Market iD, farmmarketid.com, has announced the release of its 2017 Annual Update of its farm and land database. The Read More
Food IT Fork-to-Farm
Precision AgThe Mixing Bowl Event Connects Technology, Food, and Ag…
May 24, 2017
For the fourth consecutive year, The Mixing Bowl presents FOOD IT, under the theme “Fork to Farm.” Action-oriented entrepreneurs, industry Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Seed/BiotechKansas State University Researchers Find New Pathogens …
May 24, 2017
A single seed seems so simple. Put it in the ground, give it some care, and you’ve soon grown food. Read More
Soybean Field
HerbicidesNew Dicamba Herbicide Premix Coming Soon from Syngenta
May 24, 2017
Syngenta has announced the name of its new herbicide featuring the active ingredients of S-metolachlor and dicamba. Upon registration by Read More
Eric SfiligojMonsanto ‘Picks Its Battles’ by Nixing Deere Deal
May 23, 2017
Having been in the trade journalism game since the mid-1980s, I remember several watershed moments during my career. One of Read More
FungicidesSyngenta Launches New Seed Treatment Fungicide
May 22, 2017
Syngenta has announced the launch of PLENARIS seed treatment fungicide for the control of downy mildew in sunflower. PLENARIS contains Read More
Corn close up
Crop InputsMonsanto’s First HPPD Herbicide Garners EPA Appro…
May 19, 2017
Monsanto announced today that EPA has federally approved Harness MAX Herbicide, the first herbicide in the Monsanto portfolio to provide Read More
ManagementPrecision Planting Deal, China Developments, and Enviro…
May 18, 2017
Editors Eric Sfiligoj and Dan Jacobs discuss the latest news on John Deere’s now dead deal for Precision Planting, China’s Read More
Soybean aphid leaf
InsecticidesMulti-state Research Reveals IPM Best Option for Treatm…
May 17, 2017
About 89.5 million acres of soybeans will be planted across the U.S. in 2017 — a record high, according to Read More
GROWMARK-2017-Interns
CropLife 100GROWMARK Names 2017 Summer Interns
May 16, 2017
Forty-two college students are exploring agricultural career opportunities this summer as GROWMARK interns. They are working at FS member cooperatives Read More
Migrant farm workers
LegislationTrump: Immigration Crackdown Won’t Impact U.S. Ag…
May 16, 2017
President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry Read More
Flooded corn in Indiana
FertilizerBoth Wet and Dry Conditions Threaten Nitrogen Loss
May 15, 2017
The weather is notoriously unpredictable, leading to challenges for planting, harvesting and applying the nitrogen (N) your corn crop needs. Read More
farmer Kip Tom
Precision AgAg Tech: On the Cusp of Something Big?
May 15, 2017
The investment and ag-tech sectors’ continuing courtship of agriculture, smoldering for three or four years now, was well in evidence at Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Greg Musson, Gar Tootelian
ManagementOpinion: Shaking Your Perspective in Ag Retail
May 12, 2017
Some of you I’m sure have encountered our recently retired salesman extraordinaire, Dan Bellanger. He worked in the industry for Read More