Happy New Year! Let’s go out on a limb and make some predictions for 2009 for both the agricultural and general economy. We will mix in some trends and general observations, as well.
- The first six months of 2009 will see a deepening recession with high unemployment and job losses or cut backs in hours. Do not be fooled by unemployment rates because the reported figures do not include discouraged or displaced workers. What is reported can be 2-3% lower than the actual level of unemployment.
- Land values will hit the wall in many regions of the country as producers keep profits and cash in reserve. This does not mean a major decline in land value will occur, but a slowdown in appreciation of land values, more no-sales and slower turnover of property can be expected.
- Producers and agribusinesses with fertilizer or feed inventory will be in a standoff. With deflation occurring, farmers and ranchers are going to expect discounts. However, agribusinesses that purchased higher priced fertilizer and feed inventory in will have to maintain some margin. Unless commodity prices rebound, intense negotiations can and will occur.
- Could commodity prices rebound? Yes. Less planting in the southern hemisphere, Mother Nature and the alternative energy sector could play big roles in commodity prices. Expect volatility, which will require a risk management plan along with a diversification strategy.
- Local, natural and organic products continue to increase in market share. Any media, special interest group or food, fiber or fuel scare or shortage could accelerate this trend.
- Technology’s impact on economics and production will continue to accelerate and peak in the next decades, particularly in the North American region where producers have the systems and management to implement high tech solutions.
- More legislation and dialogue relating to regulation of agriculture, similar to Proposition No. 2 in California and the proposed animal emissions tax, will emerge in 2009 as Americans continue to have a disconnect with the agricultural industry.
- China and the Asian region’s economic health will be a key to commodity and oil prices. Expect extreme volatility as emotions and psychology trump logic and reason by worldwide traders.
- Cash, liquidity, strong financials and profits will be prerequisites to doing business and borrowing money. Easy money is a thing of the past.
The superior business person who is a planner and can execute strategy will rise to capture many opportunities that will occur in 2009.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at firstname.lastname@example.org.