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

Bayer Monsanto
Eric SfiligojBayer-Monsanto: Life, LibertyLink, And The Pursuit Of Regulatory Approval
March 20, 2017
As the calendar officially turns to spring, life is in full renewal mode. Flowers are blooming, birds are singing, and Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Eric SfiligojFungicide Resistance On The Horizon
March 13, 2017
For many years now, the agricultural market has struggled to keep ahead of an ever-growing number of herbicide-resistant weeds. According Read More
Comodity Classic 2017 overview
Eric SfiligojCommodity Classic 2017: Growers’ Three Wishes
March 6, 2017
Last week, I had the chance to attend the annual Commodity Classic show in San Antonio, TX. Drawing some 10,000 Read More
Bayer Monsanto
Eric SfiligojCrop Protection Mergers: Plan B Or Not Plan B, That Is The Question
March 2, 2017
These past few months, many people that regularly follow the agricultural marketplace have been preoccupied with the numerous merger proposals Read More
Trending Articles
AdjuvantsA New Weed-Control Era Begins: But First, One Last Obstacle
March 4, 2017
There is trepidation, there is reluctance, and there is excitement. Ag retailers feel it all about the new dicamba and Read More
LIFT Academy video screenshot
Crop InputsLIFT Agriculture Academy: A Q&A With West Central Distribution’s Dean Hendrickson
March 1, 2017
West Central Distribution recently launched its LIFT Agriculture Academy, a new, premiere training and professional development resource for West Central’s ag Read More
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
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
Latest News
Pam Marrone
Crop InputsMarrone Bio Innovations Enters Biostimulants Market Wit…
March 23, 2017
Marrone Bio Innovations, Inc. is expanding beyond biopesticides and crop protection and into the biostimulant market by commercially launching Haven Read More
Nutrients for Life Foundation Teacher
FertilizerNutrients For Life Foundation Celebrates 10 Years Teach…
March 23, 2017
Those in agriculture know fertilizer is a vital ingredient to grow strong, productive crops. In fact, fertilizer is responsible for Read More
ManagementThink You Know Water? Take WinField United’s R…
March 22, 2017
Water is among our most precious resources, and arguably the hardest working, with just one percent available for human use, Read More
Corn Field
LegislationTFI Hopes Court Dismissal Is ‘Final Chapter’…
March 20, 2017
The Fertilizer Institute (TFI) released the following statement from President, Chris Jahn on the March 17, 2017, federal court dismissal Read More
Wheat Growers
Industry NewsWheat Growers CEO Dale Locken To Retire
March 20, 2017
CEO Dale Locken has announced that he plans to retire from Wheat Growers. Locken has served almost 15 years as Read More
Bayer Monsanto
Eric SfiligojBayer-Monsanto: Life, LibertyLink, And The Pursuit Of R…
March 20, 2017
As the calendar officially turns to spring, life is in full renewal mode. Flowers are blooming, birds are singing, and Read More
Corn Field
Crop InputsUltra Yield Micronutrients Acquires Kronos Micronutrien…
March 16, 2017
Ultra Yield Micronutrients, Inc. ”Ultra”, an affiliate of Cameron Chemicals, Inc., is pleased to announce that it has acquired the Read More
ManagementSnowstorms, Asset Sales, and Soybeans Prices
March 16, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss the weather, precision ag, crop protection company mergers, and commodity prices in this Read More
Soybean Field
Seed/BiotechBayer Invests $8.1 million In Soybean Advancement In Th…
March 16, 2017
Growers in Illinois and across the Midwest now have the added benefit of a state-of-the-art soybean research facility, increasing accessibility Read More
CHS
CropLife 100CHS Acquires Western Co-op Transport Association
March 16, 2017
CHS Inc., North America’s leading farmer-owned cooperative and a global energy, grains and foods company, has purchased Western Co-op Transport Read More
Young corn plants in soil
HerbicidesBest Management Practices To Control PPO-Resistant Weed…
March 14, 2017
Weeds resistant to the class of herbicides called protoporphyrinogen oxidase (PPO) inhibitors are spreading at a faster rate than weed Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Eric SfiligojFungicide Resistance On The Horizon
March 13, 2017
For many years now, the agricultural market has struggled to keep ahead of an ever-growing number of herbicide-resistant weeds. According Read More
Management2017 Commodity Classic Review
March 10, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss what happened at the recent Commodity Classic in San Antonio. Read More
Farmer using AgriSync
ManagementMajor AgriSync Update Aims To Extend Ag Experts’ Power …
March 10, 2017
AgriSync announced a major update to its leading collaboration and service management tool for professional ag advisors and their farmer Read More
Agrible Pocket Spray Smart App
EquipmentNew Agrible Pocket Spray Smart App Alleviates Spraying …
March 10, 2017
There’s a new app to help farmers decide when to spray their fields. Pocket Spray Smart is a free iOS Read More
BPIA logo
Crop InputsBiological Products Trade Association Changes Name, Exp…
March 9, 2017
The Biological Products Industry Alliance (BPIA), formerly the BioPesticide Industry Alliance, is the new name of the rapidly growing U.S.-based Read More
BBI MagnaSpread Salford BBI
Equipment14 Fertilizer Spreaders For 2017
March 9, 2017
Application equipment manufacturers stressed flexibility and accuracy with this year’s crop of fertilizer spreaders. From AGCO’s TerraGator TG9300B and Case IH’s 810 Read More
Sonny Perdue
LegislationARA: Sonny Perdue Confirmation Delay Simply A Paperwork…
March 9, 2017
It’s been seven weeks since the White House named former Gov. Sonny Perdue (R-Ga.) as the nominee for the next Read More