MACA: Continuing ‘The Golden Age’

Since the low times of mid-2008, agriculture has been on an incredible winning streak. This is as obvious to the casual observer looking at the daily commodity prices to ag equipment manufacturers in the nation’s heartland, who are scrambling to find workers to fill shifts to fill customer orders.

But how much longer can this prosperity bubble last before it once again pops? This was the key question speakers attempted to answer at the 2012 Mid America CropLife Association (MACA) annual meeting, held in early September in Omaha, NE. On the plus side, virtually every speaker remained bullish on agriculture’s outlook for the near and long term. On the downside, they said, there is no downside.

“We are in a golden age of agriculture right now and it isn’t going to end for decades,” said Dr. Jay Lehr, science director for The Heartland Institute. “People sometimes talk about the light at the end of the tunnel, but right now, I don’t see any dark at the end of the tunnel.”

Ed Lopez, director of marketing for the investment firm Van Eck Global, agreed that this is a great time to be involved in American agriculture. “Food, and the means to produce it, is becoming the new oil of the 21st century,” said Lopez. “As a result, agriculture is going to be one of the great new areas of the U.S. economy going forward.”

To understand why this seems to be the case, both speakers pointed to the same general trends driving agriculture’s growth. First is a desire among global consumers to eat more like people do in America. “World food demand is dramatic,” said Heartland’s Lehr. “The rest of the world has survived on a fraction of our diet here in the U.S., and, because of the Internet, they now realize this is the case. Since 1950, the average family has increased its animal protein consumption by 50%.”

In addition, there are more consumers who currently are, or will soon fall into, the middle class classification. By the end of this decade, it is estimated that the middle class in China will contain 234 million consumers and India’s will contain an extra 60 million.

Adding to this mix, Lehr foresees the commodity prices for grain remaining at slightly below their current levels, at worst. “The market may not be able to sustain $8 corn and $17 soybeans, but will we ever see $4 corn again? Hell, no, because then, China would step up and buy absolutely everything we had produced.”

On top of the population increase, the quest for renewable fuel sources is also driving demand for crops such as corn to produce ethanol.  Put together, both of these factors are driving commodity prices to record highs, which have kept Wall Street focused on agriculture.

“Increases in global population consumption and biofuels demand is driving commodity prices up — and will continue to do so,” said Van Eck Global’s Lopez. “Most market watchers believe that grain prices will be sustainable at their historic levels, given these current demand profiles.”

In particular, he said, China’s appetite for corn should keep that crop in a strong price position. “China became a net importer of corn for the first time in 2010,” said Lopez. “The country imported 140 million tons of grain that year, and this figure has continued to go up since.”

Land Ho-Boy!

As a by-product of this growth in agriculture, land values have continued to climb as well. In recent years, buyers have forked over upwards of $20,000 per acre to get in on the agricultural game — and this trend shows no signs of slowing down in the coming years.

“We are in the middle of the largest transfer of wealth in modern history,” said Jim Farrell, president/CEO of Farmers National Co. “For ag land values, these are the best of times, and this has been going on for the past three or four years.”

For long-time market watchers, this should come as no surprise, added Farrell. According to USDA statistics, grower profits have increased approximately 30% since 2007, spurred on by record crop demand from ethanol producers and China.

But that’s not to say that farming is becoming less popular. According to Farrell, more than 75% of the farmland sold by his firm ends up in the hands of other growers who are looking to expand their existing operations. “This isn’t like in the 1980s farmland sales event,” he said. “Back then, more than one million farmers just left the market, selling their land to be developed and taken out of production agriculture. It’s different today. Most of the land is being purchased by other growers at auction, with the newest phenomenon being the 80-plus-year-old cash buyer who is buying the land for his family.”

As for the buyers of the other 25% of current farmland, these are typically what Farrell refers to as new investors. “These buyers are bullish on the prospects for agriculture and they have a set plan for how to make a profit in farming for 10 years or so,” he said.

And the land grab should continue. “We expect a good land market into 2013,” said Farrell. “If commodity prices stay high, interest rates stay low, renewable fuel standards stay intact and China’s growth keeps going, then all is good.”

No Farm Bills In Election Years

If there is one potential dark cloud on agriculture’s horizon in 2012, it could be the prospects for a new Farm Bill. According to Chuck Conner, president/CEO for the National Council of Farmer Cooperatives, everyone in the nation’s capital knows how important Farm Bills are to keeping the country’s agricultural system protected. But in 2012, there is a much bigger issue keeping lawmakers busy — the Presidential Election and, in some cases, their own re-election bids. As a result, the drive to craft a new Farm Bill in 2012 has ranked a very distant second on many Washington politicians radars.

“That’s the one big problem with the 2012 Farm Bill — it’s not a good idea to do one in a Presidential Election Year,” said Conner.  “Agriculture would have been better off if it passed a four or six year bill back in 2007 to deliberately avoid the 2012 campaign.”

Of course, that’s not to say that absolutely nothing has been done on the 2012 Farm Bill, he added. In fact, the Senate has actually passed a version of the bill. This includes crop insurance payments, very modest cuts to nutrition spending and a gradual scaling back of conservation acreage. “This last provision could bring five million acres back into agricultural production immediately and ultimately could see 10 to 15 million acres come back,” said Conner.

Unfortunately, the House of Representatives version of the 2012 Farm Bill is much different, which has kept it from even getting to the voting stage. In this version, direct payments are completely eliminated and nutrition spending is cut $16 billion over 10 years.

“The deeper nutrition spending cuts in the House version is the reason why we don’t have a 2012 Farm Bill done,” said Conner.

At the time of his speech, Conner pointed out that there were virtually no days left for Congress to reconcile these two Farm Bills and pass them before the November election. “I’ve made a career on Congress doing nothing,” he said. “And the election will make progress going forward much more difficult.”

However, he added, there are two words that could spur Congress into action during a Presidential Election Year — fiscal cliff. For those unfamiliar, the fiscal cliff refers to several tax hikes and automatic government spending cuts that will kick into place on January 1 unless Congress acts to delay them. Among the potential fallout from the cliff — the nation’s gross domestic product could fall four points during the first quarter of 2013, which Conner said would virtually guarantee another nationwide recession.

“Everyone has warned Congress that to not act on this would mean the economic blood of America would be on their heads,” said Conner. “So assuming they do act, I think you could see the 2012 Farm Bill being part of this package because of how it will play as helping rural America.”

Leave a Reply

Management Stories

Donald Trump
Crop InputsTrump Targets Agriculture with Latest Executive Order
April 26, 2017
(Via UPI.com) President Donald Trump on Tuesday took executive action in an effort to help grow the domestic agriculture industry Read More
Sonny Perdue
LegislationSonny Perdue Confirmed by Senate as Next Agriculture Secretary; Praised by ARA
April 25, 2017
After months without a secretary of agriculture, the Senate voted Monday evening to confirm former Georgia Gov. Sonny Perdue to Read More
Stewardship video screenshot
ManagementNew Video Raises Awareness of 2,4-D Stewardship
April 24, 2017
A new public service video developed and produced by the 2,4-D Research Task Force, in conjunction with the American Soybean Read More
ManagementAn Inside Look at Award Winning Ag Retailer Gar Tootelian
April 20, 2017
CropLife Editor Eric Sfiligoj discusses An Inside Look at Award Winning Ag Retailer Gar Tootelian Read More
Trending Articles
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
Nutrients for Life Foundation Teacher
FertilizerNutrients For Life Foundation Celebrates 10 Years Teaching Fertilizer Education
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
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
Latest News
BRANDT
CropLife 100Former PotashCorp COO Joints BRANDT Board
April 27, 2017
BRANDT has announced the appointment of another industry veteran to its board of directors. David Delaney, most recently EVP and Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsFortune: Inside China’s $43 Billion Bid for Food …
April 26, 2017
(Via Fortune.com) The worst famine in human history occurred in China from 1959 to 1961. An estimated 34 million people Read More
Syngenta Sign
Crop InputsSyngenta Announces Changes in Board of Directors
April 26, 2017
ChemChina and Syngenta announced changes relating to the new Board of Directors of Syngenta following the closing of the ChemChina Read More
Crop InputsBioSafe Systems Introduces PerCarb Broad-Spectrum Bacte…
April 26, 2017
BioSafe Systems announces PerCarb (Sodium Carbonate Peroxyhydrate), a new alternative to potassium bicarbonate and lime sulfur products for use in Read More
Deere Twitter
EquipmentTop 10 Twitter Pics for #Plant17
April 26, 2017
Despite some wet weather in parts of the Midwest, growers and ag retailers are working feverishly to plant this year’s Read More
Donald Trump
Crop InputsTrump Targets Agriculture with Latest Executive Order
April 26, 2017
(Via UPI.com) President Donald Trump on Tuesday took executive action in an effort to help grow the domestic agriculture industry Read More
AGCO Ratliff featured
EquipmentAGCO Mourns Passing of Company Founder, Industry Vision…
April 25, 2017
AGCO Corp., a worldwide manufacturer and distributor of agricultural equipment and solutions, mourns the passing of founder and former President, Read More
Engenia soybeans
Crop InputsINNVICTIS CROP CARE Introduces VANDAL MOC Soybean Herbi…
April 25, 2017
INNVICTIS CROP CARE, LLC has announced the U.S. EPA registration for VANDAL MOC, a combination of sulfentrazone plus metolachlor. VANDAL Read More
Kochia
HerbicidesINNVICTIS CROP CARE Launches STAVE Post-Emerge Broadlea…
April 25, 2017
INNVICTIS CROP CARE, LLC has introduced STAVE as the newest addition to­ its expanding portfolio. STAVE will be a great Read More
Sonny Perdue
LegislationSonny Perdue Confirmed by Senate as Next Agriculture Se…
April 25, 2017
After months without a secretary of agriculture, the Senate voted Monday evening to confirm former Georgia Gov. Sonny Perdue to Read More
BPIA logo
Seed/BiotechBPIA Files Comments with USDA
April 24, 2017
The Biological Products Industry Alliance (BPIA) has filed comments with the USDA’s Animal and Plant Health Inspection Service (APHIS) Plant 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
Stewardship video screenshot
ManagementNew Video Raises Awareness of 2,4-D Stewardship
April 24, 2017
A new public service video developed and produced by the 2,4-D Research Task Force, in conjunction with the American Soybean Read More
ManagementAn Inside Look at Award Winning Ag Retailer Gar Tooteli…
April 20, 2017
CropLife Editor Eric Sfiligoj discusses An Inside Look at Award Winning Ag Retailer Gar Tootelian Read More
Students Soybean Field
Industry NewsMACA Announces 2017 Young Leader Scholarship Recipients
April 19, 2017
The Mid America CropLife Association (MACA) Board of Directors selected 11 college students to receive the MACA Young Leader Scholarship Read More
Growmark FS Outlet
SoftwareKnoa Software Solution Helps GROWMARK Boost System Perf…
April 19, 2017
Knoa Software, a leading provider of user experience management (UEM) software, has announced that GROWMARK, Inc., a regional agricultural cooperative Read More
Crop InputsFBN Publishes ‘Voice of the Farmer’ Agricul…
April 17, 2017
Farmer’s Business Network (FBN) released today its “The Voice of the Farmer”, which the company is describing as “a special Read More
ManagementTalking Responsible Ag
April 13, 2017
CropLife Editor Eric Sfiligoj discusses the Responsible Ag program with director Bill Qualls. Read More