Finding Good News in the Ag Industry Date: 12/6/2018 8:50:45 AM Author: Paul Dietmann Educational Opportunities: Articles Interests: Grain, Dairy, Swine, Beef, Young, Beginning Farmers, Women in Ag Home > Education & Events > December 2018 > Finding Good News in the Ag Industry Share: I remember watching an episode of The Indicator podcast titled “The 50-Year Newspaper” which envisioned the sort of information we would receive if our news was only updated once every fifty years instead of daily--or instantaneously--as it is now. It can take much longer for good news to develop than it does for bad news to unfold. A 50-year gap can help in bringing good news to light. The podcast mentioned two bits of good news that can be directly attributed to the progress made in the Ag industry since 1968. First, over the past 50 years the global poverty rate has dropped from 60% to 10%. People around the globe are relatively wealthier and living better lives than they did in the late sixties. Along with the drop in the global poverty rate, there has been a two-thirds decline in the number of people in the world who are malnourished or hungry. Fifty years ago, more than 33% of people in developing countries didn’t have enough to eat; now it’s down to 12%. That statistic is a direct result of increased yields of staple crops across the world granting more people better access to adequate nutrition. It’s easy for farmers and others involved in the agriculture industry to fall into a negative mindset with the current state of the Ag economy. Cash flows are poor, farm balance sheets are stressed, and adverse weather and markets are ever-present concerns. Bad news is easy to find; but what are some of the good news stories emerging now that are likely to become the agricultural highlights in 50 years? Opportunities for small farms. As some farms have gotten much larger and more specialized, while operating on thinner profit margins, the resulting decline in the relative cost of food has opened great opportunities for modest-scale, more diversified farms. When US consumers, on average only have to spend 10% of their disposable income on food, many are willing to spend a bit more to purchase premium food with qualities that align with their values. Whether the products are local, organic, grass-fed, or feature another attribute. Much of this premium food is being produced at a decent profit on small farms. Much of this premium food is being produced at a decent profit on small farms, which is good news for those farms that are able to take advantage of the opportunity. Adoption of cover crops. The cover crops adoption rate has increased exponentially in recent years. A 2017 Cover Crop Survey conducted by the Conservation Technology Information Center (CTIC) indicated that 88% of responding farmers were using cover crops, and the acreage on which they planted cover crops has almost doubled in just the past five years. Cover crops help to increase soil organic matter and water-holding capacity, and reduce erosion. Every day that there is a green leaf present in the field, the plant is pulling carbon out of the air and depositing it in the soil. The more days there are plants growing, the more carbon is removed from the atmosphere. Again, that’s good news. Aggregate farm balance sheet is steady and strong. Data released in February 2018 by the USDA Economic Research Service (ERS) show that the farm sector’s debt-to-asset ratio was 12.6%. In other words, for every $100 of farm assets, farmers held $12.60 of debt. The ratio was 12.7% in 2011, and dipped into the mid-elevens in 2012-2014. By comparison, from 1970 to 2004 this ratio never dropped below 13%. It peaked in 1985 during the Farm Crisis at 22.19%. A strong balance sheet gives farmers a greater ability to persevere through down cycles in the Ag economy. That’s another piece of good news. Now, looking for good news stories doesn’t mean completely ignoring the bad. Even though great progress has been made in the global war on poverty, still too many children in the world go to bed hungry every night. There is a limit to the number of farmers who can serve the relatively small specialty food market. Cover crops don’t work for every farmer in every situation. Although the aggregate farm balance sheet is strong, there are many young farmers and those who are in an expansionary mode whose debt-to-asset ratios are much higher than 50%, which puts them in a very vulnerable financial position. Finding good news sometimes requires a long view and a sense of optimism. Bad times will pass, as will good times. It’s how people respond to the times their facing that will ultimately make the world a better place fifty years down the road. Comments There are no comments. Leave comment Name: Email: Comments: Enter security code: Paul Dietmann - Senior Lending Officer Videos The Need for a Record System Videos Difference Between Low and High Cost Grain Producers Articles A Guide to Farm Succession Planning Articles What Drives Financial Success for a Dairy Operation?