Agriculture’s future is generally considered to be positive. Yet currently the sector is mired in a price downturn with reduced incomes. How does agriculture transition from current conditions to the long-term? This question was the focus of the Federal Reserve Bank of Kansas City 2019 Agricultural Symposium.
The Symposium brought together agricultural bankers, agri-businesses, farm organizations, asset managers, investors and others from across the country. This year’s theme, Exploring Agriculture’s Path to the Long Term, considered the linkage between current conditions and longer-term prospects. Speakers from the private sector (Beck Ag; ADM; Smithfield; Nutrien) along with those from academia (Purdue; Kansas State; Stanford: Ohio State) discussed numerous factors which will have a role in agriculture’s transition to the future. Highlights of the discussion included:
- Agriculture has returned to the “normal” normal—a range of prices and incomes like those in the past experienced between cyclical economic booms. Inflation-adjusted commodity prices (corn, soybeans, wheat) have trended lower since the 1950s due to productivity gains and global competition and will continue to do so in the future. To compete, U.S. producers must continually strive to reduce costs or create and develop attributes to differentiate their products and which add value.
- Trade and access to trade will be critical for U.S. producers despite the fact U.S. export market share has declined and is likely to continue to do so. The U.S. must continue to engage the world through bilateral and multilateral trade agreements and protect its competitive edge in infrastructure necessary for trade—both transportation and broadband.
- Global demographics will factor significantly in agriculture’s future. Population, economic, and income growth in Africa and Asia along with increasing urbanization will spur food demand. The Food and Agricultural Organization projected global meat consumption by 2050 will increase 27 percent from 2005-2007. Economic and population growth in developed countries will either slow or stagnate altogether.
- Climate change will affect both crop production and the mix of products demanded of production agriculture. Fossil fuel use, and by extension biofuels, will decline and the mix of foods demanded by consumers will change. Agriculture’s impact on the environment and its contributions to climate change will be scrutinized. Shifts in pest infestations, plant disease, cropping patterns, and availability of water for irrigation will dictate changes in how and where commodities are produced.
- The availability of skilled labor will increasingly become a limiting factor to U.S. agricultural growth. Labor shortages could mean greater capital investment and the more rapid adoption of technology.
- Consolidation in the agricultural production sector will endure. Consumer demands for transparency will lead to more coordination, data sharing, and cooperation up and down the value chain.