It’s true today’s farm economy has similarities to the 1980’s, but more noticeable are the differences, says Dr. Bob Young, the chief economist at the American Farm Bureau Federation. He and three other economists at AFBF addressed the audience at the 2017 Annual Convention & IDEAg Trade Show. Together they gave an overview of the farm economy and what to expect in the next five to ten years.
“We have actually brought on board almost 200 million acres in agricultural production worldwide since 1990,” Young said. “That’s almost the size of U.S. agriculture.” Other differences involve the increased supply and demand that has led to price volatility, and the fact that non-commercial lending today is less than five percent, as opposed to one-third to one-fourth in the 80s.
Dr. John Newton, director of market intelligence, pointed out that supply has continued to outpace demand. Biofuel is steady, but not rising; livestock use is flat. That leaves us with international trade as the most important factor. It’s key to recognize the situation, Newton points out, so we can make decisions and take opportunities within the new paradigm.
Katelyn McCullock featured her presentation on three “operational mantras,” as she calls them: maximizing revenues, minimizing costs and minimizing volatility. There are thing you can do around these price issues, Mcculloch asserts. “As much as I wish I could guarantee you a price that would be reasonable, I think the important thing is to remain flexible and adaptable. I think we tend to do really well at things we focus on every single day. I encourage you to kind of look outside those boxes a little bit. I think you might be surprised at the opportunities that you find.”
Veronica Nigh brought her message in even closer to home, brining up topics like maximizing and preserving cash within the next year or two, reducing costs, diversifying income. Look at your tax strategy, she suggests, and avoid paying unnecessary taxes. Refinance farm debt before interest rates go up again.
You can listen to the entire panel discussion here: AFBF Economic Strategy Session