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

ManagementTrip Report, PSM R.I.P, and Ag’s Reaction to Federal Budget
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
ManagementFarm Market iD’s Agriculture Database Now Covers More Than One Billion Acres
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
ManagementPrecision Planting Deal, China Developments, and Environmental Respect
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
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