2018 Agriculture Industry Outlook: Growth Remains Stagnant

In an age of excess, excess media, excess goods and the need to have excess in general, the agriculture industry follows suit. However, as the agriculture industry scaled to this need, it’s become a detrimental action as crop yields and production in general overcompensated for projected demand—there is a surplus of yields across the board. In this article, we’ll examine five industry trends and what they mean for your business.

Low Commodity Prices

To date, 2018 has been a challenging year for many agricultural sectors, due mainly to low commodity prices. Despite a decline in U.S. corn acreage in 2017, record yields mean that supplies are flush, with ending stocks increasing to approximately 2.4 billion bushels. Large inventories mean it will be difficult for demand to increase enough to support much growth in prices.

Soybeans have generally been more profitable than corn for cash field operators in recent years. China’s seemingly insatiable demand for soybeans has supported prices and kept stocks manageable. However, major competition from Brazil and increased soybean plantings as growers shift away from corn will keep a lid on price increases in the soybean market. The combination of rising stocks and continuing large global production have limited upside potential for prices.

The Dairy Decline

In addition to corn surplus and soybean subjugation, falling milk prices has been a major driver of declining forecasts. Milk prices are projected to decline approximately 10% in 2018, off the average in 2017.  Milk production, both at home and abroad, continues to outpace demand growth. While the demand for butterfat remains strong, skim milk and milk powder are in surplus globally.

In the Black

Although declining prices and international competition maybe dominating the market, farmers don’t seem to be struggling as industry trends would suggest. While farm income is expected to remain flat, debt to asset ratios for U.S. farms continue to be relatively low, held down by steadily increasing asset value and firm land values.

Help Wanted! The Labor Shortage

A general trend across industries is a lack of hands. The availability and reliability of labor continues to be a major challenge for all sectors of agriculture. Producers report increasing difficulty hiring and retaining both production and supervisory labor. According to the Western Farmpress, The United States continues to lose out on fresh fruit and vegetable export opportunities as farmers struggle to hire employees for the labor-intensive operations. This struggle, driven in part by sheer numbers of qualified applicants and rising costs to employ that labor is pushing growers and processors towards automation as they seek to be competitive in world markets.

As agriculture labor is aging out, it’s more important than ever for businesses to take a hard look at their recruiting process. Reviewing how and who you recruit and instilling a thorough and informative onboarding process is key to retention and building a strong team.

Agriculture Exports to Remain Unchanged

2018 exports are projected near 2017 levels and the agricultural trade surplus is forecasted to narrow slightly to $21 billion from $21.3 billion. U.S. agriculture exports continue to be dominated by China, Canada, and Mexico. U.S. exports to China in 2018 are projected at $21.6 billion. While exports have risen to current levels throughout the years, many agriculture economists do not expect an increase in demand relative to production in 2018.

How does your business fare compared to the global agricultural economy? Has surplus been an issue? Are you reviewing your hiring practices? These five factors may now change how you’re doing business now, but should be considered when evaluating your financial and business growth plans.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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