As the calendar has turned to December and snow is falling across much of the central and eastern U.S., many in the industry have had their thoughts turn to the future. Here, if analysts are correct, the outlook could take two distinctly different directions.
At the recent Agricultural Retailers Association (ARA) annual meeting, Curt Covington, senior vice president, ag risk manager for Bank of the West, attempted to give attendees a preview of the nation’s economic health in 2011. At best, the picture is mixed.
For the general economy, 2011 will be the worst of times. Business owners and consumers are in a bearish mood following the “false start” in the economy provided by the government stimulus package. Households dropped a staggering $12 trillion in net worth since the start of the financial crisis and many experts believe the return of full employment may be four or five years away.
“This does not bode well for discretionary spending such as housing and dining out,” said Covington.
For agriculture, however, it will be the best of times. Net farm income has reached an all-time high in the $90 billion range and farm balance sheets show low to moderate leverage.
But that’s not to say there aren’t cautionary signs for ag retailers to follow. According to Covington, volatile markets for crop and inputs are here to stay and this can easily lead to vulnerability. “It is not just about doing the doing any more,” he said. “Farmers have to be informed and strategic in all aspects of their business.”
What does this mean for ag retailers? They should learn to keep a close eye on their businesses, said Covington. “Run lean,” he advised. “Control your most visible costs and manage your vendors, labor and financials.”
This is sound advice indeed as the industry heads for a 2011 that is certain to have its share of surprises, both good and bad.
