November 14, 2011

Agriculture: the booming industry but for how long?

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Every time we turn on the T.V. and watch the news, there is one thing that we are guaranteed to hear about: the economy. Every morning when I watch the news, I hear about the poor shape of our economy. However, I then realize that our entire economy is not struggling and that there are industries still thriving. One of those industries is agriculture! Currently, agriculture is one of the strongest industries in our nation. Agriculture continues providing jobs and has a trade surplus, with this year’s surplus reaching 42.3 billion dollars. There is no doubt that agriculture is one of the bright spots within our nation’s gloomy economy.

Currently, agriculture is thriving, and it is fairly easy to find a job in this industry. Although I wonder, how long will this trend continue? How can I ask a question like this when the agricultural industry is booming? Well, if we look at our economics and past history, we know that any industry won’t always remain in an uptrend and will eventually run into some rough patches. Just look at what happened in the 30’s and 80’s. Prior to these years, everything seemed to be going good in agriculture and the industry was also in a booming stage. However, things changed and agriculture started to see a down trend. Commodity prices dropped dramatically while input costs rose. Land values that were at record highs decreased severely. This left many land owners, mainly farmers, unable to pay off debt. So what could cause our current booming trend in agriculture to reverse? Well, there are many different factors these days that could change agriculture’s advancements. Just in this last year, we have seen record commodity prices and land prices. While these prices have gone up, input costs have followed. Yet, if we would see these prices begin to fall while input costs continue to rise, which we are starting to see a little of, farmers’ incomes could start to narrow and decrease the amount of capital being reinvested into the farm operation. If these things I just mentioned were to happen, we could see a reverse in today’s agriculture’s growth. It has already been predicted that farm incomes for 2012 will be lower than 2011, which saw a record of 103.6 billion dollars. It is estimated that in 2012 the commodity prices will stay steady while input costs will increase. Yet, this doesn’t mean farmers won’t make a profit in 2012, it will just be smaller compared to this year. It is also a sign that land values may begin to slow down from the dramatic increases that we have seen in recent years.

So now our question is: when will we see this uptrend in agriculture reverse into a downtrend? To be honest, I don’t think anyone can exactly predict when we will see this. It could be in the near future or it could be many years away because of so many factors. However, it is guaranteed that agriculture will someday face challenges, and it’s just a matter of time. It also depends on how you define a “downtrend”. Does it mean slower growth in agriculture or is it when the fixed costs and input costs outweigh the farmer’s profit? One thing is certain, we will always need agriculture in our lives and agriculture will become increasingly important in the coming years due to a growing world population. So there is no real answer for this question, but it does make many of us in the agriculture industry realize that we should enjoy these times of boom but also remain cautious of what the future may hold. We definitely don’t want to go back to the time when family farms were being put up on auctions and stress levels were running high in the agricultural community. However, I do believe that farmers can handle any future challenges. I know this and believe this because they have overcome all of the challenges in the past and continue to provide food, feed, fuel, and fiber for us every day. So with that being said, let’s continue to enjoy these booming times in agriculture but not forget that agriculture won’t always be in a booming stage.

Since agriculture will not be a booming industry forever, you can also read a previous blog on why farmers need a safety net! “Why the need of a safety net?”

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