farmgate: Agriculture Needs To Look Far Enough To See Tomorrow.
Many Cornbelt farmers are looking toward a delayed harvest; others are looking toward 2009 markets, costs, and profitability. Others still are looking at the next generation on their operation. Sometimes agriculture is examined more often with a microscope when we should really use a telescope. This “big picture” edition of the farm gate will take a Hubble space telescope view of agriculture.
Weather forecasters will tell you it is easier to forecast six months out than it is to predict the weather six days out. Marketing plans are the same way, and they are tough to adjust to changing market conditions. Sometimes we miss the forest for the trees, but today we rely upon the vision of Purdue economists Sally Thompson, Allan Gray, and Mike Boehlje as they looked at the “The Long View” for Indiana agriculture. But what they report is really a long view of the entire Cornbelt.
1) The Intersection of Agriculture, Food, and Energy Policy—as they call it—is really impacting commodity prices for corn and soybeans as a result of biofuel demand. The demand will be a strong support for crop farmers. The downside is the impact on the livestock industry and it will continue to consolidate as a result of energy policy, and the higher costs of feed will impact food prices. Future policy questions to answer include assistance to the livestock industry, continuation of current energy policy, help for consumers and food stamp users, and what will develop from second generation biofuel technologies.
2) The Global and Local Influence of Demand and Supply for Agricultural Products—or the export/import market—is focused on the global replacement of vegetable protein with animal protein in diets in developing countries. The US has been a supplier of both, but what will the future hold if the US is focused on biofuels? The Purdue economists say US production is at capacity, but other parts of the world can develop more land and use better technology to supply the global demand, rather than just the local demand. But as organic production and sustainable agriculture grow, the public compares those practices favorably to traditional farming on the carbon footprint scale. The issues of environment, freshness, and local production will also drive agriculture, as will currency exchange values that have recently boosted US exports, but could work in the opposite direction. US farmers have already experienced that with higher costs of fertilizers, many of which have to be imported.
3) The Resurgence of Risk in Agriculture—which impacts the cost structure of agriculture—has caused expenses to climb and profits to fall, all in the face of higher land values and cash rents. Also the livestock industry expresses similar concerns with high feed costs, stronger environmental regulations, and being unwelcome in many rural areas. Producers will have a wide variety of risks and must successfully manage that risk for the future of agriculture.
4) The Increasing Strain on Natural Resources—as exacerbated by domestic and global food demand—has created debate on the use of land and water resources, which spills over into rural community economics and welfare. The debate also includes the location of livestock facilities and alternative uses of the land, and land values. The economists say future policy will have to blend management, technology, and regulation with the use of land, air, and water resources as long as they are acceptable to the public and not a burden on the industry’s long term financial health.
5) The Role of Biotechnology in Redefining Agriculture—in both the use of new technology and creation of new marketable products—will have profound impacts on agriculture. Scientific advances have increased productivity and economic growth, but it can also supply food and fiber with increased quality and quantity. The Purdue crew suggests biotech breakthroughs need to come quickly, provide opportunities beyond the biofuels industry, and should be incubated into many potential opportunities.
Summary:
Agriculture is faced with a myriad of policy decisions in coming years, stretching well beyond today’s debate of food versus fuel. However, those future policy decisions will have to address biotechnology, risk, natural resources, and markets that will be driven by global demands.
Posted by Stu Ellis on August 14, 2008 12:25 AM to farmgate