For agriculture industry professionals looking for insights into what 2017 may hold for the future of agriculture, the USDA’s 93rd Annual Agricultural Outlook Forum, “A New Horizon: The Future of Agriculture” was the place to be. This two-day event took place at the Crystal Gateway Marriott Hotel, Arlington, VA, Feb. 23-24, 2017, and hosted nearly 1,000 attendees. With more than 30 concurrent breakout sessions on Thursday afternoon and all day on Friday, attendees had plenty of topics from which to choose. Sessions featured presentations on important topics such as weather and nutrition as well as commodity and dairy industry outlooks.
Heading up the first morning full group session, Acting Deputy Secretary of Agriculture, Michael Young, welcomed the crowd. Before introducing USDA Chief Economist, Robert Johansson, the morning’s first speaker, Young recognized this year’s 28 Student Diversity Program winners who were attending this year’s forum as guests of USDA. Twenty of the winners were undergraduate junior and senior students while the remaining eight were graduate students.
2017 agricultural and foreign trade outlook
USDA Chief Economist, Robert Johansson gave an overview of the current agricultural market, sharing his analysis on what the prospects for production and pricing going forward might be. He said that currently, farm income is flat, but the debt-to-asset ratio remains low. He said the increasingly tight credit situation combined with adjusted land prices and the current farm programs that are working with mixed results has the industry “going sideways.” He said that while production is trending up, especially in the livestock and dairy industries where meat and dairy production is at record levels, opportunities for increased foreign trade is up due to improved global economic conditions. At the same time, prices are flat and food prices are down.
Johansson concluded by saying, “… despite low commodity prices, debt-to-asset ratios remain near historically low levels, and a majority of farm households are expected to see increases in household income in 2017, a sign of a strong overall economy. Producers still have access to relatively inexpensive credit and are likely to continue to use operating loans to mitigate slowing revenues relative to costs, although some tightening of credit availability based on tightening production margins is expected. In addition, we would expect to see farmers renegotiate cash rental agreements, which will, in turn, contribute to a softening of land values. Farm programs will benefit many producers, falling energy prices will continue to lower input costs, and new crop insurance products will cover more products at higher coverage rates than in previous years.”
Following an address and Q&A session by Iowa Governor, Terry Branstad, who has been appointed as U.S. Ambassador to China and is awaiting Senate confirmation, U.S. House Ag Committee Chair, Rep. Mike Conaway, updated the group on how Congress will be re-evaluating farmer’s needs as they move forward with a new Farm Bill in 2017/2018. After a fast-paced presentation on what the coming year will hold for the House of Representatives on developing the Farm Bill under the leadership of a new President, Conaway said everyone is awaiting Sonny Perdue’s appointment as U.S. Secretary of Agriculture. Sharing his thoughts from what seems to be a thorough understanding of what farmers need in the way of getting government programs (the Farm Bill) completed and approved, Conaway said, “My team and I are going to work really hard to get that done.”
He said he is excited about the possibilities of new tax reform and new trade agreements, and how the 115th Congress will work very hard to protect production agriculture. Conaway said that improved “safety net” programs will be developed to help farmers and ranchers deal with challenges to net farm income. He noted that because of reduced commodity prices, the need for a sound program is clear.
Next on the program, a plenary panel consisting of Rajiv Singh, CEO of Rabobank, N.A., Beth Ford, Group Executive VP and COO of Land O’ Lakes, Inc., and Luke Chandler, Deputy Chief Economist for John Deere, took center stage. Singh began by saying “Rabobank is the largest bank in the world that no one ever heard of!” Singh explained that Rabobank is a Dutch cooperative bank that was formed by farmers and is still farmer-owned today. With assets of over 670 billion Euros, 52,000 employees working at more than 1,300 offices in 40 countries, Rabobank is positioned to take the pulse of agribusiness, worldwide.
Summarizing Singh’s detailed presentation, it can be said that innovation will be needed to find profitable growth in the coming years. Citing what he called “The Long Tail Theory,” Singh used a graph reflecting product popularity of a product on the vertical axis (the “Head”) while it depicted products themselves on the horizontal axis (the “Long Tail”). Using a dairy industry example, he noted that while the popularity of fluid milk products has been decreasing over time, the shift of those purchases has gone away from whole and low-fat milk to other “milk” items such as Almond, Organic, Soy, Kefir, Coconut and other non-dairy milk products. While the kind of milk consumed has changed, cumulative consumption of all products has remained the same, to some degree. Innovative foods of all kinds need to find a place in this “Long Tail” all across agriculture, according to Singh.
Beth Ford, Group Executive VP and COO of Land O’ Lakes, Inc., followed with brief market overview of the dairy industry. She said that while dairy commodity markets are generally depressed, the slowly increasing demand for cheese and butter has helped the industry as a whole. Meanwhile, fluid milk consumption has declined at a 1.8 percent rate. Finding a home for the dry milk products that are a byproduct of butter and cheese production is challenging.
Luke Chandler, Deputy Chief Economist for John Deere, concluded the panel presentations by saying that global equipment sales in the farming sector have declined in recent years because of declining net income on U.S. farms and a general depressed economy. He said that there is an increase in U.S. business confidence despite geopolitical tensions, giving us a mixed outlook for the agricultural sectors. He said over the next five years or so, there will be a global rebalancing of grain inventories as farmers adjust to these changes in the world’s Ag economy. He said that the additional increase in world population would eventually create a demand for food that farmers will need to supply. This will help improve the Ag economy overall.
A panel question and answer period followed. The entire morning session video is available at the USDA website www.usda.gov/oce/forum/generalsessionvideo.htm .