How Marketers Can Respond in a Down Ag Economy

Featuring interviews with Richard Brock, President of Brock Associates, which publishes The Brock Report, and Steven D. Johnson, PhD, Farm and Agriculture Business Management Specialist at Iowa State University Extension.

It’s no secret that the U.S. ag economy is in a downturn. But what many ag marketers don’t know is that the economic slump presents a wealth of opportunity – both for farmers and agri-business.

Coming off five consecutive years of net farm income exceeding $100 billion, 2015 will be the first year to see a sizable drop in net farm income to a predicted $58.3 billion, according to the USDA. That’s down 36 percent from 2014’s estimate of $91.1 billion.

The 2015 forecast for net farm income would be the lowest since 2006 (or since 2002 in inflation-adjusted terms) and a drop of nearly 53 percent from the record high of $123.7 billion in 2013.

Commodity prices have dropped significantly. Corn has dropped from $7/bushel in 2012-13 to $3.50/bushel today. Soybeans sank from $14/bushel in 2012-13 to $9/bushel today.

Low commodity prices have put the brakes on the ag economy, creating uncertainty and hesitancy among farmers and the agri-marketers who sell them inputs and services.

Why the Downturn?

What factors have negatively impacted the prices of ag commodities?

For starters, it’s about supply and demand:

  • Carry-over inventories of corn and soybeans from 2014 to 2015.  We did not export as much of the 2013-14 harvests as we did in previous years.
  • 2013-14 were very productive seasons; both yields and acres planted were up over previous years, creating a greater supply of corn and soybeans.
  • Recent USDA Crop Reports for 2015 indicate higher than anticipated acres and higher than anticipated yields for much of the traditional corn and soybean producing states – creating more supply.
  •  Advances in technology and better farming practices and management have increased yields considerably over the past decade. This also has contributed to the supply of commodities.

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