Outlook 2012: Expect The Best, But Plan For The Worst
December 13, 2011 Another year will soon be gone. Welcome 2012! As with the coming of every new year, there is a sense that this year will be as good or better than last year among many. There are also a few folks who believe the new year will bring new challenges and, possibly, a market downturn. This is part of the reason why each year, CropLife magazine puts together its annual January Outlook issue — our attempt to figure out in which direction the agricultural market is likely to head going forward.
This year, however, we are taking a slightly different direction with this issue. Instead of merely predicting how 2012 might play out, we are looking at how ag retailers should prepare their businesses in these best of times for a time in the not-too-distant future when things might not be so bright.
The reason we’re doing this is simple — 2011 was by all measures one of the best financial years agriculture has ever seen. And 2012 appears as if it will follow a similar pattern. For evidence of this, consider some numbers.
For grower-customers, 2011 was “the best of times,” according to Bruce Johnson, an agricultural economist at the University of Nebraska. For the year, farm profits were projected to grow 28% to $100.9 billion, and the amount of cash farms have available to pay bills also is expected to top $100 billion. According to USDA, this is the first time in history that both these measures of farm profitability have topped the $100-billion mark. In addition, crop sales are expected to have topped the $200-billion mark for the first time in U.S. agricultural history in 2011. And the continued appetite for corn and corn-derived ethanol from countries such as China and India is expected to keep all these numbers at near-record levels.
By extension, ag retailers shared in this bounty. According to statistics from our annual CropLife 100 survey of the nation’s largest dealerships and cooperatives, revenues for this group topped more than $24 billion — an increase of 17% from the 2010 total. Furthermore, all crop inputs and services — fertilizer, crop protection products, seed and custom application — saw sales increases.
So given these facts, it would be easy for us to find dozens of industry folks to say “times are great” to fill out this issue. But as The McGregor Co.’s Steve Watts says, this could be a mistake. “[Founder Sherman McGregor] taught me that the best way to lead in good and bad times was to act as though neither would last very long,” says Watts. “And they seldom do.”
And there are hints of some unexpected dangers to industry prosperity. According to some, if ethanol demand dries up, “there will be piles of corn left unsold in the market.” Others say the financial mess created by the failure of commodities trader MF Global could undermine the grain markets.
So while we are pretty sure that 2012 will be another banner year for agriculture, it seems only prudent to consider what we should do if the unexpected occurs — just in case.
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