MACA 2013: The Other Side Of The Mountain

For its annual meeting, the Mid America CropLife Association (MACA) brought its members to the Rocky Mountains, in Broomfield, CO. In fact, the meeting played off this landscape, adopting the theme “Mountains of Opportunity.”

As Bonnie McCarvel, MACA executive director, pointed out to attendees, 2012-13 have been very positive years in the world of agriculture. Grower-customer revenues have been on the climb, commodity prices have stayed high and the overall outlook for ag remains strong as the world’s population keeps growing.

“No one in agriculture can say it was anything but a good year,” said McCarvel. “We’ve all had a lot of fun.”

Despite these pluses, however, several MACA 2013 speakers warned that the agricultural market could be in a correction or two in the next few years. One of those sounding words of caution was Dr. Jim Budzynski, managing principal at MacroGain Partners.

Budzynski has been a speaker at MACA meetings in the past — something he acknowledged in his opening remark. “Lots has changed in agriculture since I was here in 2004,” he said. Budzynski went on to point out that in the past seven years, agriculture has weathered a severe market downturn (in 2007-08, during the so-called Great Recession) and bounced back to today’s profitability levels driven by high commodity prices and record grower income.

Furthermore, he agreed that the overall future for agriculture also remains bright. “There are billions of consumers around the world who will need food to eat, that have growing levels of income and will want more protein in their diets,” said Budzynski. “So the long-term, macro story for agriculture is good.”

However, there are some dangers to agriculture’s golden age of prosperity in the near term. In particular, he said, the U.S. government efforts to stimulate the overall economy since mid-2008 have resulted in some excessive spending levels, which won’t be sustainable forever.

“The government is spending $80 billion per month in stimulus money,” said Budzynski. “Last year, overall farm income in the U.S. was $50 billion or so. Think about that for a minute – we pump more money into the economy each month than we made in farming for all of last year.”

An Ethanol Engine

How might this affect agriculture’s income potential going forward? In a word, said Budzynski, ethanol.

“If there’s one thing that drove where we are in agriculture right now, it’s ethanol,” he said. “Government mandates for ethanol use have kept demand high and also built up a big market for corn.”

In fact, said Budzynski, U.S. growers have increased their corn production levels approximately four billion bushels in the past few years to keep up with ethanol demand, which now accounts for approximately 40% of the U.S. corn crop. Most of the increase has been achieved through higher yields and shifting more farmland acres to corn from other crops such as wheat and cotton. This has also led to a direct correlation between corn, oil and the U.S. dollar.

“When you get to where you can convert a bushel of corn into a gallon of gasoline, you have a direct link between the price of corn and a barrel of oil,” said Budzynski. “If oil prices go up, our commodity prices go up because ethanol is a replacement. And if oil price go down, we are going down with it.”

In the big picture, said Budzynski, this means that if the U.S. government should suddenly stop supporting ethanol usage, agriculture would take an immediate financial hit. “Ethanol support is critical,” he said. “If we remove the supports for ethanol, we will all be in the soup in a nanosecond because we have such a huge percentage of our corn production going into that area. You can’t remove that kind of a chunk of demand without causing a dramatic decline in prices.”

Other Predictions

As far as agricultural companies and suppliers go, Budzynski foresees the overall market quickly moving towards what he calls platform convergence. “The consolidation roll-up of companies is done,” he said. “Productivity convergence is where the really big ag companies are going to go next, trying to provide integrated platforms, and not just products, to provide more complete answers to customers. That means these companies are going to start buying other companies that will cross over the formally distinct categories such as crop protection, crop nutrients, biotech and precision ag because buying companies in the vertical doesn’t work within a platform-driven world.”

For ag retailers, said Budzynski, size and market prominence will be critical for survival. “The problem small ag retailers have is not that they are not service-oriented, it is platform items such as precision ag are incredibly capital intensive,” he said. “It will be really hard for many of these to compete in this kind of environment. Overall the No. 1 and 2 players in the market will be well positioned to survive. However, for No. 3 and 4 players, it will be much more difficult, especially if the bigger players are stealing their customers and hiring all their employees away.”

Bigger picture, Budzynski said that agricultural fortunes in this latest “up” cycle may have peaked in 2012, with a market downturn taking hold during 2014 or 2015.

“But by 2020, the big picture is still good,” he concluded. “People will want more protein, and this will drive demand for the products agriculture has to offer. Bottom line — the sun will shine for agriculture going forward. It just might not shine every day.”

Dangers To Crop Protection, Biotech

Another set of speakers at MACA 2013 included three crop protection company representatives. They discussed the rapidly changing agricultural landscape. According to John Chrosniak, global business director for DuPont Packaging Graphics, the crop protection products industry is critical to keeping production agriculture going. “To help feed the world’s growing population, we need to get more out of every crop field,” said Chrosniak. “Six out of the last 11 years, we’ve consumed more than we’ve produced globally. But it’s likely we wouldn’t have had any surpluses without the use of crop protection products to help keep yields up.”

Despite this importance, the crop protection products industry finds itself being attacked by special interest groups in a seemingly never ending wave of misinformation and outright lies. In this kind of an atmosphere, said Jim Blome, president/CEO for Bayer CropScience LP, government regulatory agencies are increasingly making product registration decisions based more on political pressure as opposed to sound science.

“This has particularly been the case in the countries of the European Union (EU),” said Blome. “Part of the problem there is the general population across Europe doesn’t believe their regulators, so sound science on the safety of some of these products isn’t trusted.”

The situation has been made more problematic for the crop protection products business, he added, because of social networking and the Internet. “Today, the speediness of rumors on certain products is a big threat to our industry,” said Blome. “Special interest groups targeting a particular agricultural product can be against it and spread their messages at the speed of light.”

According to all three panel speakers, this kind of public pressure was at work earlier this year in the EU when its regulatory agency decided to ban neonicotinoids at the end of 2013 because of implied links to honeybee declines.
Could this same kind of public backlash against crop protection products happen elsewhere in the world? It’s possible, said Blome.

“I believe that in America, registration decisions will continue to be made based upon science, not speculation,” he said. “But I am concerned that these kinds of attacks could have an influence in the decisions being made in countries such as Brazil and Canada.”

Corey Huck, head of U.S. sales for Syngenta, agreed with Blome on these points. “The trust factor is the key difference between U.S. and EU regulators,” said Huck. “But Canada could be the new frontier for regulatory mistrust to appear.”

In this kind of environment, said DuPont’s Chrosniak, the agricultural industry must keep fighting to protect its interests wherever possible in areas such as biotech crops.

“We as an industry believe that the science is irrefutable that genetically-modified (GM) crops are similar to traditional ones,” he said. “But there are plenty of efforts underway to label products that contain GM crops in their mixes by special interest groups, inferring to the general public that they are harmful by being different. This is the kind of stuff we need to fight back against.”

Leave a Reply

Management Stories

ManagementMACA 2014: The State Of The Agricultural Industry, And Then Some
October 9, 2014
The trade association’s annual gathering featured speakers from across agriculture and beyond. Read More
StewardshipA Multi-Layered Approach To Water Quality
October 6, 2014
Illinois event highlights research and technology designed to better monitor and improve water quality — and the benefits of cooperative, coordinated effort. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
ManagementRussia Bans U.S. And EU Ag Product Imports In Ukraine Sanctions Battle
August 7, 2014
Russian President Vladimir Putin has banned the import of agricultural goods from countries that have imposed sanctions on Russia. Read More

Top 100 Articles

CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
CropLife 100BRANDT, Verdesian Ink Distribution Agreement
December 9, 2014
The agreement grants BRANDT the exclusive right to sell and market Verdesian’s patented Steric chemistry in the Turf and Ornamental and eastern U.S. ag markets under the BRANDT Reaction product line name. Read More
CropLife 100CropLife 100: The Colors Of Custom Application
December 5, 2014
Although many color spray rigs are in the yards of the nation’s top ag retailers, the majority of them still come in only a few shades. Read More
CropLife 100Pinnacle Invests In Meridian Agriculture Distribution
December 4, 2014
Meridian will provide retailers with supplier-branded products and numerous opportunities to differentiate themselves from their competitors. Read More
CropLife 100CropLife 100: Entering A New Seed Era
December 4, 2014
The seed category has been re-vitalized during the past few years, and more good news (and varieties) are headed the industry’s way in 2015. Read More
CropLife 100CropLife 100: The Depressed State Of Fertilizer
December 3, 2014
Following downright giddy growth earlier this decade, fertilizer sales have fallen back down to earth the past two years. Read More

Latest News

Seed/BiotechKaren Arthur Joins AgriThority As Seed Treatment Produc…
December 19, 2014
Prior to joining AgriThority, Arthur directed research and development programs, overseeing laboratory and field research, to build the Valent U.S.A. seed treatment portfolio. Read More
EquipmentJohn Deere To Sell Crop Insurance Business
December 19, 2014
Deere & Co. has reached a definitive agreement to sell its crop insurance business, subject to regulatory approval, to Farmers Mutual Hail Insurance Co. of Iowa. Read More
Crop InputsNufarm Fills Regulatory VP Position
December 18, 2014
Nufarm announced today that Rob Schwehr has been promoted to the position of Vice President of Innovation & Regulatory Affairs for Nufarm Americas. Read More
Seed/BiotechReport: China Approves Viptera Corn, U.S. Officials Awa…
December 17, 2014
Chinese authorities have informed some agriculture industry officials the government has approved U.S. imports of a type of genetically modified corn developed by Syngenta. Read More
FertilizerMonty’s Plant Food Brings In New Sales Rep
December 16, 2014
Monty's Plant Food Company has hired Warren Kearns as its newest Sales Representative for the South Carolina area. Read More
EquipmentHagie Wins 2014 CropLife IRON Product Of The Year Award
December 15, 2014
The self-propelled sprayer maker has a hit on its hands with the new STS Series model. Read More
Syngenta
Seed/BiotechSyngenta Sees China Approving Contentious GMO Corn Soon
December 15, 2014
Syngenta will make an announcement when it receives official documentation from China that Agrisure Viptera corn, known as MIR 162, has been cleared for import. Read More
Crop InputsVerdesian Life Sciences Names Vice President Of Communi…
December 15, 2014
Amy Bugg will oversee the execution of all promotional strategies for the corporate brand and the complete product portfolio. Read More
StewardshipFarmers, Retailers Attend 4R Certification 4U Workshop
December 15, 2014
More than 160 farmers and ag retailer attended the “4R Certification 4U” workshop December 12 to learn more about the 4Rs of nutrient stewardship, water quality research in the area and cost-sharing opportunities. Read More
Matt Hopkins10 Best New Agriculture Apps For 2015
December 15, 2014
These new agriculture apps are certain to help ag professionals do their jobs more efficiently in 2015 and beyond. Read More
ManagementARA Learnings, Retail Buying Intentions: Welcome To Cro…
December 12, 2014
This informal video program puts news and events effecting retailers into context, and features Editors Paul Schrimpf and Eric Sfiligoj. Read More
Seed/BiotechMonsanto Herbicide-Tolerant Technology Closer To Commer…
December 12, 2014
The final EIS moves Monsanto one step closer to the introduction of Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybeans, paving the way to provide access to dicamba-tolerant soybeans and cotton. Read More
Seed/BiotechUSDA Issues Final Environmental Impact Statement On Her…
December 12, 2014
The USDA Animal and Plant Health Inspection Service (APHIS) is issuing a final environmental impact statement on varieties of cotton and soybeans that have been genetically engineered for resistance to several herbicides, including the one known as dicamba. Read More
CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
LegislationARA Applauds CFATS Passage Prior To Holiday Adjournment
December 11, 2014
The streamlined bill provides a four-year authorization of the CFATS program and guidance to DHS on key issues of chemical facility security Read More
Seed/BiotechBayer CropScience’s ILeVO Approved By EPA
December 11, 2014
EPA has approved ILeVO, the only seed treatment that protects the root system against infections caused by the Sudden Death Syndrome fungus and has activity against dangerous nematodes. Read More
Biologicals in Emerging Markets Map.
Crop InputsBiocontrols Could Quadruple By 2025; Will Regulators Pl…
December 11, 2014
The European experience with GMOs offers caution — and a promise — for biologicals. Read More
Crop InputsBASF Donates $75,000 To Feeding America
December 10, 2014
The donation will support Feeding America’s National Produce Program, an initiative that helps with planning, transportation and logistics to ensure fresh produce deliveries to the 200 member food banks around the country. Read More