What does a rice shortage in China have to do with U.S. agriculture? Hold that thought for a moment …
First off, let’s consider the state of the general economy. It’s getting harder and harder to ignore what’s going on and wondering what this might all mean for the ag retail business. On a recent business trip, I happened to flip on Bloomberg Television for a half-hour before leaving my hotel room. The negative, dire news I heard in that brief 30-minute span almost had me convinced to sell my house to avoid a money-losing mortgage and pull all my remaining money out of the shaky banking system and stuff it into a nice sturdy mattress.
It was thoroughly depressing news. But none of it affected me directly. My mortgage is fixed and my bank is still in business. Furthermore, this news won’t change the way I write stories or do my job.
This brings me back to the rice in China image I started this column with. A speaker at a trade show talked about his recent visit to a Chinese client and being invited to dinner. Since this was a long-time friend, the speaker commented on how he remembered this man’s mother always kept one bag of rice in her kitchen as a matter of course. Yet on this night, there were four bags of rice scattered around the kitchen instead of one.
“Why do you have four bags of rice?” asked the speaker.
“Because I heard there was going to be a famine,” said the mother.
“There will be now,” replied the speaker.
The message was clear — the rumor of famine caused all the mothers in this Chinese town to stock up on rice, causing a shortage to take place. Will the ag retail industry, reacting to the negative news from all around it, cause its own rice famine-like event? Let’s review the facts.
Unlike other parts of the nation’s economic base, agriculture is not begging to be saved. Ag retailers and their grower-customers made more than $100 billion during 2008. More importantly, as the world’s population continues to expand, the need for row crops to feed this group remains a high priority.
Despite these facts, the industry seems to be in a holding pattern. Grower-customers aren’t placing orders and retailers are afraid to stock up on inventories that might quickly lose value. Everyone, it seems, is waiting for the other guy to blink first, anticipating times will be tough in the months ahead. This could create a serious problem come spring. A sudden, last minute rush for crop inputs might severely tax the ag retail industry’s ability to meet demand and bring about the unsettled state of business everyone is hoping to avoid by standing pat.
I agree that, given the state of things, everyone needs to proceed with caution. But should the industry wait until the last minute to move ahead when, metaphorically speaking, there seems to be plenty of rice to go around? This approach can only serve to make the market even more uncertain.